1st not a pro. Semi pro with restoration experience. In my experience the mortar that you are talking about was added the the gap after the outer framing, in a poured foundation they would have put the uprights and sills in during the pour. remember in those days the carpenter would build the windows on site and to measure. The mortar usually is quite fragile and chips away easily. Likely to be adhered only well on the block side so care not to damage the block is needed. I would remove existing windows and mortar then install the new window as one would nowadays then use spay foam to fill void. Then cap with appropriate trim.