drip cap would be installed under the siding and over the alum casing caping, essentially just as it is now except over the alum.

I don't like to remove drip caps. Either that or we install new ones.
They are there for a reason.

OK.. SO THEY JUST CAP THE 4 SIDES AND LEAVE THE DRIP EDGE WOOD EXPOSED?

+1 to sky's feedback.

Drip caps are metal, not wood. Sounds like you have a Cornice (correct term?) over the window.

Normally not capped because they are decrative. If capped then usually done in a way to make it look nice. Or replaced with a new PVC/Composite style.

Or, if it is a metal drip cap, they can wrap all the sides and tuck the top wrap under the cap. Tha drip cap should not be removed unless it is going to be replaced.

this is replacement, not new construction. when the windows are being installed the contractor will install a strip of aluminum that covers half the old sill and is then bent outward. it doesnt seem to bend upward at all on sides ( jamb), is that a problem? he just caulks the sides where aluminum meets jamb.
he said this will serve as extra protection.
i guess this is called a sill pan?
is aluminum ok to use even though its conductive and new window sits on top of it?

thats good practice. aluminum is fastened to the original sill and L'ed outward. foam should also be added between new window and original sill for extra protection/ insulation.
never heard of a condensation issue.