I purchased a home lead test last night... both tests came back negative for lead. So thats out of the way.
I still feel like somehow this is actual wall that is tearing off and not paint. You can see the individual layers of paint on the huge pieces coming off. What is left on the wall feels incredibly smooth and not at all like drywall. But, in any case, i guess i will just take off what i can, sand, prime, and paint. Ill have to see if i need to rip down the whole ceiling and wall, or if i come to a natural point where i can just sand the edges smooth.