Yes, but try to get the plaster's undulations and avoid drywall's dead flatness, please.

I can assure you I have respected and restored the historical integrity of every detail of this house while renovating over the last five years. This fireplace is not original. The wall is.

You can get something of the plaster appearance by applying a skim coat of drywall mud over the drywall. If you're at the same skill level I am, it'll automatically have some of the unevenness you see in old plaster. :-\

Drywall patches have worked well for me in my c.1925 foursquare. (I'm in New England.) Like DavidR I used joint compound to skim coat the patch with good results (I'm sure he's too modest about his skill--I'm not and it looks fine). My contractor, skilled with older houses, uses a half-and-half mix of Plaster of Paris and joint compound to skim coat drywall. This has worked well for me on larger patches. There are several discussions here on Houzz which touch on this situation.

Why not use blueboard/plaster? You'll get a better outcome. I don't understand the near-universal urge to use drywall mud in place of the correct material.

Plaster undulations? You must have a pretty poor plaster guy. Most plaster walls I've seen, at least those done by pros, are way flatter and more uniform than drywall.

We found that a good portion of the wall had lifted from the lath so had to removed
more of the wall than we had hoped. Wound up using 1/4" sheet rock + Plaster of Paris First coat applied. Sanding tonight. We'll see how this goes!

Thanks to all for the perspective!

Looking good. Big improvement.

Finished product....

Beautiful!