Problem with leaking window seal

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I have a problem with new vynl windows, I have water coming inside the window and recking the woodwork around my windows. The window company came back and sealed the corner of the windows on the inside were the water should run off. My question is two parts, first I don't think this seal should have ever have been broken. Especially on all 24 of my windows and to damage so much of my woodwork. Should they have just clued the windows back like they did or replaced them?
Second, the water damage to my woodwork, should I just have it sanded down and re-painted? I am so afraid of dry rot......this house is only 3 years old, but still the windows should have never been leaking in the first place and the window company is going to take care of all of the damage. I just need a straight answer on how to go about fixing it.

Thanks, Jeanette