How to drywall a concrete footing
That footing isn't that big.  You glue it on.   It isn't that big of a deal.   The big deal is grinding out the protrusions.   You don't deal with those and the bottom of your wall is going to look pretty wonky.

I would run the drywall until may 2" above grade - give yourself some room for moisture and know that your flooring will take you up at least 1/2".   Tack on 4"+ trim (pine is my choice for basements)and it looks like you will have only 2-3" on the concrete with the trim going up over most of the concrete (meaning you will be gluing your trim on but that is a different question).