I’d move them up to the wall and put past the windows

I'd move them up 4-6 inches. It gives the illusion of a taller window.

I misread your comment, I thought you were asking about curtains. Yes, if you go with wood blinds, I would definitely mount inside the window frame. If you add curtains, then you want to mount them above the windows.

Almost all curtains look nicer high, full and wide. But you said you wanted wood blinds so high and wide isn't always the best choice.

Blinds are trickier, especially if you want light control. If you go high over the trim, the light will bleed through the sides because your blinds will be mounted away from the window. And if you choose wood blinds and mount them up and away from the window they might be noisy and messy because they aren't supported by the window frame.