Hi David, if I follow your question correctly all that you're wanting to do is create a faux window casement. I son't see any need to remove the drywall as long as you use really thin wood, say 1/16"-1/8" thick. The reason being not to obstruct the physical window which would leave a really bad looking result (IMHO). If you're going to use thicker wood then I'd remove the drywall on the inside of the window opening. Finally, nailing the thin wood should be no problem considering that underneath the drywall are 2x4s all around the window. Good luck!
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