Cannot see the pic. Post it here in the comments.

Yes. why not put a vinyl sill expander from the factory there.Does that window have nail fins on the sides??

Just to confirm, I can caulk the wood all the way around, including the bottom red line? Can I fill the gap with foam?

Picture isn't mine. Found it while researching online. Actual window doesn't have any nail fins. House is 90+ years old. Thank you.

" Picture isn't mine. Found it while researching online. "

Need to really post a pic of yours as caulking in the wrong context can do more harm than good.

It's a friend's house and I'm not near it. But it's the same as the pic above. Angled wood sill, vinyl window. Wood trim gap filler.

caulk it.