I just trimmed out this window for one of my customers. They wanted to add 1 inch blinds on the inside of the window frame.
There was only about a half inch space between the window and the sheetrock. I used 5/4 pine to pack out window, trimmed over that and installed new extended window sill. Now there is now enough room for blinds to be installed inside the window trim, it looks great and hardly noticeable!