Order the shade with outside mount valence. When the product arrives use a hacksaw to cut down the valence ends to fit your window properly. An inside mount valence will not have sides to cover the head rail protruding out.

I would be concerned about working the window with that little clearance. Can you mount the valance and the shade on the outside? Make sure the valance has "returns" on the sides.

With Smith&Noble products you could easily go either way. It is simply a matter of preference with my customers. The second image shows an inside mount with protruding valance. Sides are covered, front face is material covered or you can choose a metal finish.

Outside valance looks more "finished" to me.