" should I be concerned about the integrity of the windows "

No, the water if it gets to the interior may stain the pine but the window should basically be unaffected unless left like that for a year or so. Do you any pictures you could share? That may help us help you.

The mortar blocks both sides from the ability to open

I believe the fault in this case lies with the mason, and not with the window supplier. The windows were sized according to the framed openings called out on the plans. Your mason installed the stone over the window sashes, in error.

I should’ve been clearer- these are replacement windows on a house built in 1982…

In that case, the windows are obviously not sized properly. Modifying the exterior stone is, in my opinion, not a good option. I would require them to order new windows that are properly sized to operate within the limitations of the stone exterior. They screwed up and they know it.

I'd like to know how they secured the casements that can't be opened. Did they just push them out until they contacted the stone and then add interior stop material? If they can't open the window, they can't secure it with screws through the jamb. They didn't use nailing fins, since they installed from the interior.

Somewhat gray situation IMO. I agree with Ultra, that even if the masonry was pre-existing, the windows were properly sized to the RO's and the masony is the item done "wrong". I assume the outgoing windows were double hung or sliders where this wasn't an issue?

With that said, the window company does have a duty to ensure that the chosen configuration will work, including measurements inside and out.

At the end of the day, due to the masonry placement, there was going to be additional work needed here one way or the other. With the current size the masonry needs to be cut back. Had they been downsized to fit within the masory, you likely would have some interior refinishing to do because the windows would be smaller than those that were taken out. Again, issue either way due to the masonry and operator type (casement).

To answer your questions more specifically:

1) No worries about the integrity of the windows

2) The proposed solution is the right one given the current state.

3) No reason to believe that there will be issues down the road.

The real concern here is the lack of action moving the solution forward, and the fact that ideally this would have been identified and discussed up front. Oustide of that, as long as this gets moving forward and there is an agreement regarding who will cover the cost of the masony work, you are on the right track.

I can only see 3 ‘screws’ holding the windows in place on each side. There were bags of unused screws that were left on the windows.

These are how they are attached into the frame

And yes, the old windows were aluminum double hung all the way around & original to the house (hence the great mortar job! 😂)

Screws through the jambs would be conventional, and three per side is farily normal unless the windows are very tall. That said, given that they aren't yet foamed or shimmed, I suspect that there is more work to do in getting those secured once the mortar has been addressed. My guess is that they didn't want to get to far in the event that they would need to be removed for that work to be done.

Properly measuring and ordering replacement windows includes taking into account the exterior cladding material and any adjustments to sizing that may be required in order for the windows to operate properly. The window contractor has sole responsibility for this. It is their mistake, not Marvin's.

As to the solution, I would be extremely hesitant to modify the stone exterior in any way, since there's really no way to know how the finished product would look. Once the stone is ground down, there's no easy way to put it back if you don't like it.

That looks like limestone. Are you in Texas, by chance?

Yes, I'm in Georgetown just north of Austin! The stone is limestone/Austin stone exterior

The most beautiful town square in all of Texas! What an awesome place to live. We have good friends there in Georgetown.

This is one of the installation issues that makes me thankful that I don't work in the hill country. Rock exteriors make replacing windows much trickier! They should have taken both interior and exterior measurements. Looks like they only measured the interior.

So they're essentially saying they can just cut back the mortar & the windows should function properly. They feel it's just a matter of too much mortar in that area impeding the window's ability to open (which is obvious on all windows). I agree with @HomeSealed Exteriors, LLC that there would be work either way- interior work vs. exterior work depending on if the window was resized. I'm wondering though, is it okay to just cut back the mortar/refill & call it a day? Or should the stone be removed & replaced properly? Or does that matter?

I don't think the windows will open up fully by just removing the mortar, they'll likely hit the stone in places. If redoing the mortar fixes the issue, that would be acceptable to me (as the homeowner).

+1. I'd agree that there may be some greater concerns if any measureable amount of actual stone would need to be removed, but if its just excess mortar, that's an obvious solution.

Seems like the issue is that the casements require clearance for the sash to swing out - where the double hungs didn't. And whoever installed them didn't take that into consideration. Are you saying that the sash hits the mortar on both sides? And is it just the mortar or will it hit the stone also?

Bit of a cluster. Definitely a tech measure issue. You can either have much smaller openings or have the stone work done. Probably going to be a toss up on the realized expense differential in this case.

I have to agree. Have them replaced, and go back to double hung windows.

This is clearly window contractor error. You're actually doing them a favor by making them replace the windows or come up with a viable solution. The pain of that expense is necessary for the lesson to have meaning. They will never repeat his if you follow through. Hopefully you still owe them money.