[MRM]

I spent about 15 years representing the largest window manufacturer in the country. You need to fill the void with low expansion closed cell foam. Great Stuff window foam with a small nozzle to get into the cracks and entirely fill the void is what you want. The foam has to fully fill the void so that water can’t enter but it can’t expand because it would impinge on the window frame if it did. The foam also needs to be closed cell so it doesn’t absorb water.

Get the right Great Stuff product and shoot the void until it’s full. Let it sit and expand and dry and then cut the excess away. Don’t bother with Fiberglas.

You do have to caulk the joint. That is essential. Use backer rod and caulk to seal the exterior joint and prevent water entry. Just caulk alone won’t seal the joint even though it looks like it will.