I would notch the drywall and embed the niche in thinset so that everthing is flush to the drywall surface.
The Kerdi will then sit flat on the face of the niche.

From your photo, I notice the drywall has compound over the screws and it looks like there's a taped and mudded joint above the niche. You should not have taped or applied any drywall joint compound to any surface thats going to get Kerdi. Thinset won't stick to the joint compound, especially if you sanded any of it.
You are going to have to prime the compund areas and then wait 3 days minimum before applying any Kerdi.

Hmmm, I wasn't aware of that about the joint compound.

I was reading "The Kerdi Shower Book" by John P. Bridge and he noted that the recess joints (horizontal seams between the boards) should be taped, and that was all that was required. He also noted that he did not have time to sit around waiting on the drywall compound to dry. So I reasoned that I *did* have time for that to dry and decided to prep all.

So, sand and prime, I'll do it.

Now, back to "notching" the drywall for the flanges of the niche, does "notching" mean to only remove enough of the drywall to get the surface flush? Or would it be better (easier) to remove all the drywall under the flanges and add enough support on the underlying framing (which is on all 4 sides) to get the surface flush?

What John meant is the seams can be taped with Alkali-resistant mesh and filled with thinset, NOT drywall compound.
Seams or joints do not need to be taped when Kerdi is being installed.
You can notch the drywall about 1/4" as long as there is still full support behind the board.
Use thinset to set the flange area and construction adhesive for the back of the niche which butts up to the other drywall.

I have started to score the drywall around the flange of the box and use a chisel to take out about a 1/16" to make the flange flush with the drywall.

If that's a Recess-it box, it should have come with four screws, and there's a hole on each side of the box to put them in.

Good thing about Recess-it box vs. making your own, is that Recess-it is already waterproofed. I cut the Kerdi even with the inside of the box then hit the bottom corners with a little silicone to seal them up.

Thanks so much for the responses... if I knew then what I know now...

Let me also add that I plan to use the slightly modified Versabond instead of the unmodified thinset, I've read a lot of posts where the kerdi has not adhered well when using the unmodified, and also, John has indicated himself that he uses Versabond acknowledging the voiding of the warranty. What are your thoughts, can I use it everywhere, under the kerdi, under the prefab curb and tray as well as under the tile?

I know a lot of people use it as an alternative to some of the cheaper unmodified thinsets that are available. This may have come about because the only unmodified at Home Depot is sub-standard.

I've used Laticrete Megabond from Lowe's for quite some time now and have never had a problem with it. It's a little cheaper than Versabond and retains the warranty.

Well, the notching went really well:



Now it's time to finish sanding the joint compound areas and to prime the walls. Is it ok to just prime all the wall being I've mudded a good bit?



I've seen other posts recommending the Zinsser Cover-Stain Oil-Base Primer-Sealer from Home Depot.

I'm not the only one who derived the same conclusion from John's Kerdi Shower book, and that is the sealer recommended for the others in the same boat as I.

I wish John had clarified that either in the book or as an addendum, it would have helped not only I but others as well.

Edit:

Here's another question, how deep do the dips have to be under the shower base before I have to use leveling compound? The floor is basically level, but has very shallow dips, when I walk around on the base there are 2 places where there is a slight movement of the tray. Will the Versabond serve to "fill" these shallow areas?



Another Edit: I just re-read all the posts in this thread, and back on an earlier post I stated that I read where one should not use joint compound with the kerdi, and I did it anyway, what was I thinking? Probably forgot I read it, re-read John's book and thought to do it. Dummy me.

dips are very easy to fill. Just pour in a bit of runny thinset and strike off the excess with a straight edge. the next day take off any bubbles or bumps with a trowel.

OK, got the walls primed (1st coat) and the slurry down. Wow, had to have the windows open most of the day.



Decided to put the tray down and let the slurry dry as it needs to as I'm not in any hurry.



Hopefully this is not a big no-no. Please advise in case I have to pull it up. The level checks a good slope all the way around towards the drain.