Whats above the drop ceiling? Are you planning on keeping the paneling ?

Is this in a basement?

Keep the focus on the rest of the room and no one will notice the ceiling. In any bedroom,the bed itself,because it is such a large plane, can easily distract from a less than perfect ceiling. Have you decided on the bedding? The general mood, a colour? And honestly,I would probably just paint that bit of molding to match the wall colour. Don't skip putting on primer,it is cheaper than the paint and will give you both a clean slate to plan on and a better final result.

I would paint the ceiling and trim the same color as the walls, with one wall behind the bed, perhaps, as an accent wall in a darker hue of the same color or complimentary color.

Spend a bit of effort on pizzazzing up the bed, maybe with a dramatic padded headboard (easy DIY) and pillows and the ceiling will go unnoticed.

Why do you want to take out the drop ceiling?

Okay then i would start by replacing the ceiling tiles. Lowes and Homedept sell some that look like a pretty Moulding. They come in different sizing. Usually they have them in stock too. I’d keep everything fresh and white since you have the panellingOn the wall. If that panelling on one wall? If so can you place the bed against that wall so it looks like an intentional feature wall? Beef up the crownlike you planned. One youget the new ceiling tiles the nicer crown will tie in. What colors are you thinking of for bedding ? Furniture?

Also is there a way we can get a couple pictures of the overall room ? Just the ceiling doesn’t really help us help you.

My guess is that there is wood lath above the ceiling and the tiles are stapled to the lath. It starts at one end and each tile that's installed covers up the last tile's staples. Of all the solutions proposed, sheetrock is the cheapest and fastest. If hubby doesn't want that, leave it and focus on the rest of the room.

I wrote a detailed response and it just doesn't show up for some reason...the short version:

The tiles should be glued or stapled or both (as seabornman says)...I don't see a dropped ceiling here, but you can get up there and push on a few tiles to see if there's any movement...if not, it still removable, but time consuming. A lot of scraping will have to be done, if it's glued, and you won't have a perfect surface, but at least you'll have a surface that you can attach drywall or beadboard or whatever you want, to.

Anyway, diy removal is free, so that's in your budget.

The paneling would be the same...if it sounds hollow when you knock on it, it's probably just tacked up and will pull right off. Again, that's free.

The molding looks to be plastic, which is what was used with the thin paneling in the 70's. It's not worth anything and will come down easily.

You'll have a beautiful room with a bit of effort and it will be done right.

So, if I were you, I would attack it with gusto...

Very nicely done!

I bet you're so happy with that ceiling gone...