My walls are a mild sandy yellow. Plate rail will be a corresponding white. I plan to paint the ceiling a faint robin's egg blue.

There is a 2"lip, which extends vertically from the ceiling end of the cove up to the ceiling.

kind of like this
ceiling _
lip |
cove (

What color should the cove be? should the lip be?

Thanks for suggestions

You don't want to change color where all you can do is mask it and hope...it will never look right. You can change the color at the inner corner between the lip and the ceiling, that's relatively easy, and it will look right. I would carry the same color down onto the cove IF there is any kind of a molding between the cove and the wall. If, as I suspect, there isn't, then carry the wall color up onto the cove, and change color at the intersection between the top of the cove and the back of the lip, so that the lip alone is a different color. What color? what about the same white as below?