drywall on crooked wall
 

I'm trying to finish an addition that was unfinished when I bought the house. The previous owner was done up to final insulation and drywall. Insulation was easy. I've got drywall on the ceiling and one wall and am finding that the walls are not square to each other along the height of the wall. The next wall is an exterior wall with an old full-width 4x12 that sticks 10-1/2" down from the ceiling. The problem is that it also protrudes into the room beyond the stud-wall beneath it by 1" at one end of the room to 1-1/4" at the other. I don't think it's a problem to attach the drywall directly to the beam, I just am not sure how to join the two different height surfaces. Since the wall already has a pre-hung door installed I'd prefer not to add spacers behind the studs to make one continuous wall surface. Is there a good way to join the jog between the beam and the wall? Or should I bite the bulllet and add spacers?

Can you install crown molding, and just cover the offending beam edge right up?

I may end up doing that. I'm concerned that it may look odd since I don't want to continue the crown molding around the entire room and it's so far from the ceiling. We thought about adding some lights inside the molding to add some mood lighting.