Answers

This really depents on how the exisitng garage is framed, but in most cases is could be possible. Would entail a new header and side studs, then then siding & trim. 

Have them take that metal off that they installed "over" the existing step flashing. You'll need to check the step flashing cards to make sure they are all aligned and in the right places. Chances are they are not. If they are in the right places then it's your window leaking. Best I can do for you without running a hose on it. 

No you could run a hose on it...start along the roof line first and eliminate each area before spraying up towards the window.