Locate the soffit frame studs behind the drywall with a stud finder. Break through the drywall between the studs along the face of the soffit with a hammer. Use the claw end of the hammer to remove the drywall and nails.
Measure the interior width and depth of the soffit with a measuring tape. Cut a section of 1/2-inch-thick plywood to these measurements, using a table saw.
Measure and mark the location of each stud's center on the edges of the plywood that will face the front and back of the soffit. Draw a straight line between each pair of marks, using a metal straightedge as a guide. Cut the plywood along each line with a table saw, and number the pieces so you can install them in the correct positions.
Draw a 2-inch-by-2-inch notch on the outside corners of the two plywood sections that will face the sides of the soffit. Draw a 2-inch-deep-by-1-inch-wide notch on the opposite corners of these sections. Draw 2-inch-deep-by-1-inch-wide notches on all four corners of the remaining plywood sections.
Cut out the corner notches on each plywood section with a jigsaw.
Tilt one of the end plywood sections and insert it through the opening at the front of the soffit frame. Place the section on the bottom soffit frame studs so that the notches fit around the front and back studs. Using a drill equipped with a screwdriver bit, secure the plywood to the bottom frame studs with 2-inch wood screws. Repeat this process for the remaining plywood sections.
Cut sections of 2½-inch-wide molding to fit the exposed top, bottom and side stud faces with a circular saw. Miter the ends at 45 degree angles so that the molding sections fit together neatly. Attach the molding sections to the frame front with 2-inch nails and a hammer.
Cut sections of 2½-inch-wide molding with a circular saw to fit the studs along the front of the soffit. Attach the molding to the studs with 2-inch nails.
Apply wood putty over the nail heads with a 1/2-inch putty knife. Paint or stain the molding as desired.