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tipsbytom said in January 6th, 2012 at 6:28 pm

Dave,
It appears that the contractor may have missed some steps with window install.. Please look through the following link about installing replacement windows.

http://www.thisoldhouse.com/toh/how-to/step/0,,218006_150067,00.html

After installing the weather shield daylight should not be seen between window and framing, after the siding is already in place. The rough opening is a nice fit for the new window, but still there should be no daylight showing through.
At this point the exterior of the window will need to be caulked up to prevent the intrusion of water (and wind). Between rough opening and window on the interior should be sealed with a expanding foam made for for windows and doors (to prevent warping of window frame).

Hope this information helps.

Thanks,
Tom