I had similar molding in my previous home. It was an original feature of the 1920s bungalow. I was told they were intended to hold picture hangers so plaster walls wouldn't be damaged by nails. We experimented with the painting. We ended up with the area above this trim painted the same as the ceiling in smaller rooms and/or rooms without crown molding at the ceiling. This looked better for two reasons. First, it brought the ceiling height into better proportion to the room dimensions. Second, the line where wall met ceiling was not very straight or smooth. Old plaster can have a lot of lumps and wiggles that are virtually impossible to paint as a straight line. Our "public" rooms like the living room were larger and had crown molding at the ceiling. For these rooms we brought the wall color all the way up to the crown molding. Painting the "picture hanger" trim the same color as the wall is best if you don't want a racing stripe. Hope this helps.