Remove the old sheetrock and install new sheetrock. Don't use greenboard, just regular sheetrock. Don't prime it or paint it. The only thing I do with seams where two pieces of tapered sheetrock edges come together is to use alkali resistant backer tape and thinset to go over that. Not because the joint needs to be finished, but because I don't want the recess in the plane of the wall.
I am planning on having a bench and recessed niches. What are the specific requirements there? Thanks in advance!
Well, normally for a niche I would calculate where each row of tile will fall along the wall and frame out the niche to conform with a balance of tile around it, placing blocking between the studs, covering with cbu and painting on a waterproofing membrane such as Hydroban or Redgard, within the niche and 6-8" around the niche over the wall. I always make the bottom a little bit lower so that as I go up the wall with the tile, I can use the tile edge as a screed guide and fill with mud or mortar.
Pretty simple to do. However, If I were to go to Hell when I pass on, spending eternity wrapping niches is kerdi would be my punsihment so I will suggest to you to use a preformed niche and bring the Kerdi over the face of the niche using "kerdifix" to adhere the Kerdi to the niche. I know of no reason why you couldn't use a waterproofing liquid membrane over the niche as normal and then use Kerdifix to seal the Kerdi to the liquid waterproofer, other than incorporating two different products like that would remove the warrany you'd have from either manufacturer.
For the bench, you can frame it with 2x's and add plywood and sheetrock to the seat and sheetroc on the face and then cover the entire thing with Kerdi. Works great when it's all clean 90 deg angles. If you want a rounded bench, Noble company makes preformed benches in round, square and neoangle and triangular configurations. You install them once you are done wrapping the shower with kerdi, pick a corner for the bench, pile some mud on a layer of thinset, comb thinset on the back sides of the bench, place it in the mud and press the thinset coated sided against the wall and use Kerdifix between the bench edges and the Kerdi.
Finally, by far the best method of creating a bench is to use a product from Innovis Corporation called " Betterbench."
Both Nobel and Innovis make preformed niches as well.
Noble sells online with $5 flat rate shipping on all orders or you can use the like for a local distributor and Innovis has a Dealer locator link on their site. Sheet Membranes & Shower Installation Products for Tile & Stone Shower Benches and Shelves - Better-Bench, Better Bench Adjustable Unit, Recess-It by Innovis Corporation
Good luck with your project.