drywall ceiling repair after bathroom fire help
Having the ceiling drywall resting on top of the drywall for the walls adds stability at the edge of the ceiling. You can augment this stability by screwing small 2x4 sections into the beams and then screwing the edge of the ceiling drywall in to those 2x4's. It all depends on the orientation of your beams. As long as there is support along the edges, it should be fine. In addition, you will want to use some kind of tape between the ceiling and the wall to deal with reducing any cracking that may occur due to house movement.
I would personally remove all bits that are sticking further out than your wall. If they are behind the face of the wall drywall, in my opinion, they are ok. In addition, I would remove all affected drywall from the ceiling. The last thing, in my opinion, that you want to do is "cover up" a problem. These tend to come back. It is much better to fix it right the first time than to deal with fixing the same issue multiple times. Typically from my experience, paint (etc) doesn't fix the problem, it hides it and it only hides it for so long. To my knowledge, there is no "sealer" for a situation like this.