USE 1/2" ON YOUR WALLS unless otherwise directed by local codes!!!!
The reason you ALWAYS use 1/2" on walls is because the framing of a common 2x4" wal is 3.5" and the 2 layers of drywall on each side gives you 1" giving you 4.5 inches. Stock door jambs a re 4 9/16" and are designed to be flush with the drywall. I just finished a trim job
http://paragonrenovations.net/basementtrim.aspx where the "contractor" and I use that term lightly! used a combonation of 5/8 and 1/2 and it threw all of the jambs out of whack and led to cutting back sheetrock just to be able to install the casings.
Now if you are considering taping the job yourself cut away but if you are considering hiring a taper then start saving your pennies because if the taper has to tape 100 butt joints the price will be EXORBINENT I promise you that! You may be able to find a cheapie contractor that will do it for next to nothing but remember you get what you pay for.
In conclusion use 1/2 on the walls and get the rock down in as large of sheets as you possibly can!
James