How should I fill channels left in old plaster after dado rail removal?

I just purchased a condo in the Boston area. The house has been built early 1900s.

I'm removing dado (chair) rails in the dining room that don't look great and are just dust collector at this point.

I used a pry bar to remove one of them and am now wondering how I could patch those holes.

It seems that I am dealing with:

• lath
• Horsehair plaster
• wallpaper 1
• wallpaper 2
• drywall

More pictures

Here is what I think I should do:

Option 1:

• take a piece drywall, screw it to the lath
• dry wall tape + joint compound
• primer + paint

Option 2:

• screw plaster washers on the remaining plaster
• add missing plaster to the lath
• take a piece drywall, screw it all the way to the lat
• dry wall tape + joint compound
• primer + paint

Please advise. Thanks!