Ken, I would totally use corner blocks and regular crown molding. With that foam and plaster stuff, because you're using joint compound to hide the seams, you'd need to do a bunch of touch-up painting after it's up. With corner blocks and wood -- depending on the flatness of walls and ceiling -- you might be able to get away with prepainting the molding, nailing it up, and then just filling and paining the nail holes. If, on the other hand, your walls or ceiling are a bit wavy, then you should use some paintable caulk to fill the gaps. I'm guessing you have some living room wall and ceiling paint left over?
By the way, if you want to borrow my chops saw (with laser cut line), let me know.
