It looks like you will need a new piece of molding. But, what caused the hole. Is there water damage in the ceiling?
The hole just sort of developed over a long period of time (it's been the same size for many months...probably a year)
Can't remember exactly how it started.
I don't think it's water damage. There is no moisture above the hole.
When you say a new piece of moulding, would that be a segment cut to approximately the size of the hole?
You can fill and shape it with plaster or dry wall compound. Screw some dry wall srews in first leving the stick out aboout ½", they will act as anchors for the fill.
If you use drywall compund you'll have to put it in in layers and let each layer dry, heavy fills crack as it drys. Build it up to close to even with the old molding, don't worry to much about makeing it smoth until you do the final layers but do try to follow the shape of the old molding.
If you use plaster you can fill the entire hole. You take a piec of sheet metal and cut it to match the shape of the molding. Fill the hole and pull the metal acrross to form the shape.
For us amatures, the drywall compund would be the easiest.
Be sure you live your life, because you are a long time dead.-Scottish Proverb
I agree with JLMcDaniel. One addition: there is a product out there (many years proven) called Durham's 'Rock-Hard' Water Putty (see site http://www.waterputty.com/ ). It mixes with water and can be worked before it hardens like the plaster with metal, and after with sand paper and tools. It can fill deeper cracks/voids also. I like this stuff because I don't have to buy a lot at a time (it's at bigbox lumberyards now too) and can be used for a lot of filling jobs (cracks and voids in dimensional stock, screw ho;es, etc.). It can be mixed sloppy or stiff as you need and has a good set-up time for this type of product.