Just to resolve this thread, I thank all for the great advice which will serve me and others faced with troubleshooting window problems. We extensively hosed the window on the outside with no problems. Checked the attic found no water leakage. Peeling paint turned out to be a bad paint job five years ago where the painter didn't remove all the wallpaper glue. In setting up a protocol to troubleshoot these things, I have learned how important it is to listen carefully to the original complaint. Someone might say, 'there's water getting in the window.' They didn't see water, they felt some dampness of plaster and assumed outside rainwater was entering. plaster with peeling paint near a window can allow humidity to enter during storms and feel a little wet but not be harboring actual water. Especially if a through the wall AC/heating unit is not air sealed and lets in cold air and allows some condensation. We've now had the walls scraped, oil-primed and painted with no sign of moisture. The forty year old AC/Heat unit has been removed, wall sealed and radiator soon to be installed. Thanks all.