How to seal inside window correctly?

Either foam up or sand cement fill then if the gap is wide place a bead over the gap then silicone seal up

Should be filled with expanding foam excess removed and window trim and silicone to cover photo not visible to advise what trim needed for a nice finish trim can be glued on with mitre bond

The best thing to do about this is to use mastic to fill the gaps as mastic allows for movement whereas filler doesn’t so mastic won’t crack over time but filler will.

If I were u I'd but a 20 or 30mm cloaking fillet and use that then seal

We use a foam filler around the whole window to prevent and draft and also clamps g the window into place for my strength.
Once the filler has dried it will swell it and go hard enough be able able to pick and snap pieces off which come past the window. Then either silicone and stuck a beading on your edges.
But, be aware to use gloves using this foam as it is extremely sticky and if I get on your skin, your not getting it off for a good 3-4 days!
Hope this has helped
Take care, Crafted Woodwork

Use expanding foam to fill the gaps then ideally use a UPVC trim to cover the old scar line the run neat line of caulk to finish.

Seal with silicone