How to fix an uneven (curved) upper window box to install blinds?
I would insert the spacer as you suggest, and then re-trim the front. Sanding 1/4in is a lot of work.
It seems that the casing trim is straight, but the window box is curved. You can get small trims (e.g. pine stop molding) which you could mount to the front face of the box, butting it against the existing casing and against or even in front of the top of the blind frame.