It is best to have the new piece go behind the old tar paper at the top (so if any moisture gets inside the wall, it will run out and away from the wood) and to have the new tar paper in front of the old tar paper at the bottom (so that is any moisture gets in the wall, it will run outside, away from the wood). Use as few staples as possible because holes in the tar paper can let water in.
If the stucco sags, wait 5 minutes for the stucco to harden some and then level it again. If you wet the existing wall, it will help the new stucco to adhere to the old. Stucco does not stick to oil, mold, dust, dry, loose or very smooth surfaces.