To answer your question yes caulk is ok
, but if you hang it right you may not even need that. If you do caulk it wipe it with a wet rag to slick it out.. (Make sure the wallpaper is protected with blue tape where you caulk, unless it is vinyl wallcovering).
If possible stay away from the wall with the wallpaper. (cutting the ceiling about 10" away).
Use a piece of blue tape to run across the top edge to protect the wallpaper, hang a piece of plastic from that blue tape. If it is a string cloth be super careful with it.
First thing put a drop cloth or piece of plastic on the floor to catch fallout. (it will save you a bunch of cleanup).
If you can't stay away and must pull the drywall out from above the wallpaper then be real
, real, real
careful when you extract the ceiling piece.
Mark the ceiling where you wanna cut it out and score it with the utility knife, score it over and over and over and over till it is 99% cut through, then it will come out real easy.
Also the corner tape is going to need to be cut right in the corner with a sharp utility knife. (where the wallpaper meets the ceiling).
Remove the damaged ceiling piece, you do not have to cut it back to a truss but cut it pretty square. then use a piece of 1x4 as a nailer.
Install your new piece it should slip in a slot above the wallpaper. (Normally the ceilings are hung first then the walls are pushed up, helps hold the ceiling up).Important
use a factory edge to slip in above the wallpapered wall.
Put a piece of self adhesive fiberglass tape on the flats.
Put a coat of mud over the fiberglass tape and wipe it tight. (make sure to cut your edges) leave it smooth, don;t worry about how it looks just wipe it tight.
Don't leave any edges with your mud cut your edges with your mud knife.
If you want get a bag of 45 or 20 minute mud and mix up small batches you can do all your coats back to back.
Recoat it wiping it tight every time, forget about how it looks, just wipe it tight, after the 3rd or 4th coat it will disappear.