Cut the piece of sheetrock to fit the size of the area needing repair---square is easiest to measure and cut. The area should include exposing half a stud on each side---if more than two studs need to be covered, just make sure the two outside ones are half exposed. That is so the patch piece can be mounted with screws/nails.

Locate the hole position to to bottom and mark on the patch piece. Then simply cut the patch horizontally at that measurement---you can finish each half of the hole by carving it out as you set the pieces in place.

Then tape and mud the edges and the horizontal seam.

Measure twice.
Cut once.

The biggest annoyance would be working around the toilet. I believe the way to save the most time is to pull the toilet: shut off the water, flush the toilet twice, disconnect the line to the tank, take the nuts off the two bolts fastening the toilet to the floor, and pull the toilet...15 minutes max. (Also put a large rag or old towel in place to keep out any methane odors while you work.)

If you have a shutoff valve for the water supply right there, you also might be able to just remove the screw holding the handle on, and make a hole in the sheetrock that is just big enough to slide the piece of sheetrock over the valve. Then put on one of those little round chrome plates that fit against the wall and hide the rough edge of the sheetrock. If you can do this, you can just use a single piece of sheetrock and have one less seam to bother with. When you finish the repair and paint, buy a new $2 wax ring and reinstall the toilet. (P.S..: don't forget to remove the rag!)

spray foam will seal it up tight if the hole is very large. i did this behind our toilet, they hole was bigger than the chrome ring on one side, i guess it had been that way since the house was built. i spray foamed it, let it dry then shaved it down to flush with a razor knife. then i just painted over it and you cannot even tell what i did.

I remove the drywall by cutting alongside the stud and then sister 2x3 (drilled and screwed) for a nailing surface. If you cut in the middle of the stud you will hit the previous nails or screws.

Not having exotic contractor tools like zipsaws or 4' levels this is easier for me.

Thanks for all of the advice.

Regarding the toilet, it was removed and that's when I discovered the damage to the flooring, and after removing the baseboards to replace the flooring I discovered the damage to the drywall. This started out as a small project to replace the wax ring...

By the way, I plugged the toilet pipe with a large rag and the rag dissapeared! I posted about the dissapearing rag in the plumbing forum but there were no replies - maybe no one believed me. I'm going to try flushing it through with a 'drain bladder' before putting the toilet back on.

Well first of all, I use a "wad" of toiler paper to seal off the toilet flange, not cloth... Be sure to buy a new wax ring also.

As for the hole around the pipe, I'm assuming you're not going to cut the supply valve off. If that is the case, you'll have to seal a large hole. Use the same piece of drywall that you cut OUT of the sheet to seal the hole. Simply cut it in half and shape out the inside to custom fit around the plumbing, then use drywall tape and mud to create a finished product.

If you are cutting the pipe, then just buy an flange to go around the pipe before you replace the supply valve back onto the plumbing.

You may wish to try the new wax-less ring out - it has a rubber insert and seals nicely I have been told (by an apartment owner friend of mine).

If you need to place a flange around the pipe and need to do it after all is finished, you can get a split flange that slides over the pipe. See the link below.

Here is a link that might be useful: Split Toilet Flange

Part of the reason for our decision to replace the drywall was that it bowed out and we assumed it was due to water damage. Once I got back there though, I discovered that the bowing was unavoidable because the pipe comes out of the foundation at a point that is even with a straight line to the walls on either side. There's no way to put in a section of drywall that goes flush with the wall without bulging out over the pipe.

So, my patch is in, bulging like the original, and with the evidence of my first tape/float job showing through. Any suggestions for fixing the bulge if we decide to tackle that in the future?

Thanks again for all of the helpful advice.

"Any suggestions for fixing the bulge if we decide to tackle that in the future?"

Unless you want to replace the DWV line, pad the wall up with another layer of drywall.

If the pipe extends up/out less than the thickness of the drywall, I would have left a groove for the pipe, then paper-taped it after having first applied a thin layer of joint compound on the back of the tape (with a 4" knife, for example). This would make it harden sufficiently when dry. And I might cover the pipe with a bit of plastic first.

Now that it's done, you could release the pressure by cutting a notch with a drywall knife, then do as above.

One other way...instead of applying joint compound to the back of paper tape and applying (as above), you could instead cut cover with some drywall screen patch (paint store), cover it, and put some compound on it.