Mortar touching wood =WRONG
Modern masonry veneers should have , Veneer, cavity, rainscreen/ drainage/ dampproofiing, sheathing, frame and insulation.
maybe a layer of insulation inside of air cavity, or over sheathing/ under rainscreen........
window apron needs to dump into sill flashing.......with weeps and or drain holes. or run metal flashing over top of sill to drip edge
The detail at head of masonry story is HORRIBLE.
The older window is ROTTED away from poor installation,
Couldn't you find a mason to match somewhat the pattern of the old stone work a little closer? DYI?
I'd install a tin drip edge that went under second story siding rainscreen/ "Red Line" and kicked out a few inches BELOW
'and away from top of Rock Story.
Check out MII or any other masonry code site for details that actually work for decades.
Quality window makers have accessories that allow replacement of windows without removing any masonry.....think metal brick mold.
Veneer on wood frames should NEVER actually touch the window, as the wood walls grow and shrink every year, eventually the window will hang on the the masonry, leading to many issues.
I'll use a fiberglass rod to form a void for caulk, and never lay the lintel tight to the window head....