Typically (I don't know if this applies to a Delta), you make the opening so just the plaster guard sticks through the finished surface. On that, there may be a min/max set of lines to identify the proper depth in the wall. The screws attach to the valve, and if the depth is correct, will allow you to tighten the plate tight against the finished wall. Note, some people have complained about 'too much' of the handle sticking out if the valve is set near the max extension value...this is a personal preference, most people prefer it to be closer to the wall with less sticking out, but may not be possible depending on the wall depth.
The foam strips are fine to seal it. there is usually a small section on the bottom missing to allow any moisture that might get through (and there shouldn't really be any) to drip out past that gap. You can silicon it in place, but then would have a major pain getting it off for service, and are likely to bend it while attempting to do it.