Whether the window is 1/4" out, or 1/4" back, here's the thing. You do not want to be 100% dependent on the caulking alone for the seal above the window. Especially a curved top window. Even silicone will separate with expansion and contraction of siding, windows and aluminum wraps. There is some extremely tenacious caulking available, and I would be sure to use only the very most advanced kind, especially above. But regardless of all that, you should not let this be installed without it being "drip capped", or flashed, up behind the siding 2 inches at least, then out and over the edge of the top of the window. If they are competent at their metal work, they should be able to figure this out and do it. It will be a pain in the neck and take extra time, but it really has to be done properly.

If I am understanding you correctly; you are replacing wood windows and wood trim with clad windows and clad trim. I am not sure why you don't order the window with the clad casing installed in the factory and install a drip cap around the casing in the field like WD talks about in the above post. Then you are not reliant on the caulking which will be a regular chore for you to monitor. Most of the major manufacturers offer a number of different clad casings so you should be able to find one to your liking. Good luck!

+ one on both of the above's advice