I'd say you could do either one. I'm assuming your concern, is that with a dropped ceiling, it would drop below the top of the windows.

There is a product called ceilinglink (www.kensa.com)that is a ceiling grid system that uses standared 2x2 or 2x4 ceiling tiles. The top track screws into the ceiling joists, and the bottom track ,which holds the ceiing tiles, snaps into the top track. You only lose around 1" of ceiling height. This is what i used in my basement, and I'm glad I did. If I ever want to run wires, or need access into the ceiling, I still can.

Home depot sells a similar product, but it's a lot more expensive.

I always recommend a drop ceiling for basements. It makes it easy to get to mechanicals or if you ever need to run coax or cat5. I guarantee that if a pipe leaks above a drywall ceiling it will not appear directly below the leak.

Mike

whatever you decide, don't drop below the top of the windows. That won't look right.

Jasper,
That is what was driving me crazy. The windows are higher than the ductwork, and only one window had ductwork next to it. We've finally decided to go with sheetrock to avoid the wierd reverse window well look that couldn't be avoided with a dropped ceiling.
Thanks.