You might try cutting the cedar siding off 2" above the concrete and yes, the metal flashing will certainly help. It will be a chore to dig the covered siding out of the concrete but I think it will be worth it. I would also use a good elastomeric caulk in the place of the siding in the concrete (silicone, butyl rubber, etc.).
I appreciate the pictures you included, however my computer won't open them. I used the right click and open pictrue thing but it doesn't work. I don't know whether its the computer or the operator that is too dense but I do have a good idea.
Hang in there!