It appears you are installing replacement windows inside the old window jambs rather than attaching to the rough opening. My usual approach in replacing windows (and its been a long time since I did), has been to use a reciprocating saw to completely remove the old window, jambs, sills the works. Then I have access to the building frame and can run flashing behind the siding and out over my new window frame.
I have always attached windows to the frame and used the existing opening as my R.O. measurement. I have used attachments systems ranging from a flange on the window to jamb mounts that pull the window against the house frame. Understand that by removing all the old window components, you end up with a larger window.
Since I have never installed to old window jambs, I am hoping David will give an opinion here. I just don't have first-hand experience with this approach to installation.