Velux window varnish - with pictures

[foxyvox]

After receiving great help on painting my kitchen cabinets, here I am again, now on the topic of velux window varnish.
In case you can't tell, I've not DIY-ed much during my lifespan!
Our velux windows have this laquer type thing coming off - what am I meant to do? The wood does not appear to be rotting, as in it's not particularly soft when pressed down.
My plan is atm to sand down as much of the flaking laquer as possible, then apply wood varnish. I may be compeltely wrong so please educate me.
Attached, pictures of the windows and the varnish I am planning on using.
Many thanks!

I looks like damage from water penetration. The sealed unit needs removing and re-sealing before you do anything else.

Thank you; I think the water damage is from condensation dripping down rather than water coming through, as it's an old stone house, and we have condensation throughout when it gets below a certain temperature, but no water coming through when it rains.

We had something very similar. Sanded, filled any dodgy bits and then painted. Matt paint not varnish. Sorry can't remember what type.