BMF CONSTRUCTION There are several ways to deal with it, here are a couple;
1. Attach 2" thick piece of wood material (perhaps 2x4 with 1/2" ply strip) to the face of the studs, then attached your drywall to that. This will "furr out" the walls 2" and you can now run drywall all the way to the floor. Downside is that you lose 2" from the wall.
2. Another approach is to just case the concrete in wood trim (1x material) so you now have a base that is
about 4 3/4" tall and about 2 3/4" thick.
3. In a bedroom, you can build out the wall behind the bed for a shelf, so that can solve the footing on that wall
(see attached photo). If you closets on one side of the roof, those will hide the base.

Tere Ruvalcaba Thank you for your suggestions. We are planning on building a big closet on one of the walls, and that will take care of that eyesore, at least you can't see it so much. And maybe this shelf by the window on the other side.

maestraeva This is beautiful.

lilpookie27_2012 i love the way the hole room is set up i want room like that is so cozey i can lay cross that bed or in front of the fair place and read a book

BMF CONSTRUCTION I'm not sure, if I can locate the color I will post it. I am sure that it is a Benjamin Moore Aura.

ghille Thank you!