Do you plan to leave the pine 2Xs for treads? If so, if it were mine I would cut the corner of the 2X off flush with the inside of the stringer and add to the top of the stringer to give it a little more height. I would run the sheetrock outside the stringer instead of on top of it and proceed from there.
Basement Stair Finishing Help
We are finishing out our basement, and are stumped by the current stairs. The stringers are routed with the treads set in, but they are not set completely in. They stick out from the stringer housing. Has anyone seen this before, and can anyone provide any ideas how to finish these out. We are planning on doing dry wall up to the top of the stringer and above will be open with horizontal rails (if that makes sense). Thanks for any help!
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Thanks, BigJim, that's the solution we had come up with as well. We may make some bigger changes in the future, but for now, this will work and within our budget! The risers were added by the builder as an afterthought to pass inspection quickly as we had a tight move in date. Those we will be replacing, and we'll be adding quarter round to the front of the treads and paint all around. Thanks for the input. If anyone else has any other helpful ideas, keep them coming 
I would second the motion to start over. there is no center stringer which means those treads will be sagging in a couple years.
start with proper stringers. if you can at least see if you can add a center stringer to your existing.
drywall pocket
Make sure you have proper kicker and ledger/hangers.
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