I have to install a piece of 2x6. Should I install it above or below the replacement window?
How high do you want the window? If you want it higher you should add the framing below.
Then you will have a weird space at the bottom.
Install it above. The sill usually has a tilt and it will be level with other windows.
here is some info
Add to the top. It will look better trimmed out at the top. You can then add a valance if you want to disguise the space or add great trim to the top.
You could split the difference and center it.