Fig 2 shows where to cut wallpaper strip No 2, this strip will cover a section of wall above the window, the side reveal and a section of wall below the window. although there will be a small overlap of wallpaper above the window I have always found this to be virtually unnoticeable, even less so when curtain rails etc, are fitted in place. Use your plumb line to ensure the strip hangs perfectly vertical before making any cuts for the reveal and window sill.
I personally prefer to repeat this method on the opposite side of the window and then hang wallpaper strips to cover the gaps in between the top and bottom of the window and the top reveal. As I wrote earlier in this post any small overlaps of wallpaper are generally unnoticeable as they are hidden by curtain poles above and radiators below the window etc. If the overlaps won’t stick down very well, let the paper dry and use overlap or border adhesive to overcome the problem. Remember to wipe clean the window frame and sill of any wallpaper paste that may be present.