I was planning on leaving the sandwiched part between the wood. I could try filing the jagged edges down.
I expect to find some rotted wood behind there...not a lot because the frame itself isn't squishy from the outside. I was going to fill with that epoxy resin stuff.
I was studying up on weatherstripping for awning windows. It looks like v stripping attached to the frame, not the sash, is the way to go.
That epoxy resin is good stuff, we used it on rotten wooden sills, 'til we got new windows and just ripped all the old stuff out and installed new wood all around.
I think installing the weatherstripping on the frame is a good idea, and it should be a little simpler, too.