Wall-ceiling gap
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I have the same kind of ceiling in our bedrooms and had the same problem. Rather than fight it, I decided to put tiny Christmas LED lights into the grooves all around the room. Turned out great - give it a try!
You could try rope lights just hang on hooks along the top edge or any lights. Just put up hooks every few feet. I have the same in the house I'm renting put in one room pugs only on one side of room , 2nd room only 2 plugs & only one works, my room only 3 & 1/2 of one works & one doesn't & 3rd one works. So I can't do it. Good luck.
I might add additional quarter round moulding to cover the gap...adds another dimension to your trim
I was going to say caulk, but after reading Lsherbach's answer, I like that better if it can be done.
This SOUNDS doable, but the surfaces (ceiling and moulding) are textured and not very straight... could be nightmarish in the long run. I think the caulk option is more practical.