I was thinking of trimming my sofits out in wood and wondered if I didn't need to rock them then? I would prefer not to have the extra thickness of the rock and it would save some money.

I don't see any reason to sheetrock them.

The fronts of my soffits were done in plywood with no rock.
http://i240.photobucket.com/albums/ff231/oman321/DSCN1776.jpg
I then skim coated the ply with compound and sanded smooth. Then they were primed and painted.
http://i240.photobucket.com/albums/ff231/oman321/DSCN1969.jpg
Also, I used painters caulk at the seams and where the ply met the sheetrock at ceiling. Initially I saw hair line cracks at those places, took care of it with the caulk.

I'll be stuffing the soffits and covering the bottom with fabric. Good luck.

The main problem I was thinking about was fire code. Do they like the whole room to be ecapsulated with drywall?

I sheetrocked my room first then built my soffits. Not sure about acutual fire code, I know material used has to be of a certain thickness to meet fire rating.