Drywall – How to get a reasonable plaster finish in an awkward recess

Though you might be able to mud over them, you're looking at 1-2' of mud (feathered) around each screw to make it not noticeable, which basically means you'd be covering the entire piece of drywall with mud. Like pretty much everything in construction, it will be much easier to do it properly now rather than try to fix it later.

If your driver is slipping out, you are probably not using the right bits (or your bit is worn out) or are not pushing hard enough on the drill to prevent the bit from slipping out. Make sure the bit fits well in the screw head: it should not have any room to wiggle in any direction, and should not slide around. #2 Philips is the usual here, but depending on the screw head it may need to be a sharper/longer or blunt tip.

It could also be that your screws are not the right type. If you're going into wood studs, generally you should use coarse thread screws. If you're going into metal studs, it should be fine-threaded screws.

Since the board is also 5/8, it may be that the screws are not long enough. Try longer screws, which should get a better grip on the studs behind so once they start going in, they'll go in as deep as you need.

You can drywall over the plaster, but you'll have to do the entire wall and screw through the plaster into the lath/studs.

Alternatively, you can fix the plaster itself. The problem is, it's separated from the lath. The fix for this is to drill shallow holes into the affected area JUST DEEP ENOUGH to penetrate the plaster, not the lath. Drill the holes 4" apart in a grid pattern.

Then use a caulking gun and inject construction adhesive into each hole to create a glue layer behind the plaster between it and the lath.

Press the plaster up against the lath with a flat board, holding it ONLY UNTIL THE PLASTER STICKS. Don't leave the board there too long or the glue will grab it too. Slide the board up and down to keep it from sticking while the glue takes hold between the lath and plaster.

Allow it time to dry, then patch the holes and paint.