New construction...for chemical/mold sensitive owners

We have AAC block walls. Window anchor brackets do not sit flush with wall because window rough openings were cut too large. Perimeter of window opening needs to be built out up to 5/8" to conceal the window brackets for which the gyp-kote finish goes over. We've run into financial issues because of the project and it would cost too much to rent a special bandsaw, cut pieces of blocks and mortar them around each window piecemeal.  The current builder suggests using drywall - but regular drywall is a concern for me if it gets wet (these are windows after all), and we're unsure if there's a good "nontoxic" paperless drywall out there yet - at last search, most are treated or have formaldehyde.

Anyone know most up to date info on drywall and/or have another idea/material for how to resolve this issue?

You should be able to cut an AAC block with just a regular masonry abrasive blade that fits a standard 7-1/4" circular saw. I can cut regular concrete blocks with that. Those blades are only $3 to $5 at most hardware stores. Here is one at Amazon for $1:

http://www.amazon.com/Vermont-Ameri...950&sr=1-7

Or if you want to go a little more exotic, get a 7" diamond rim blade for your circular saw. Here is one at Amazon for ~$11:

http://www.amazon.com/Skil-79510-Cu...B000BM8NS8

Turns out the above idea is cost prohibitive unfortunately. We're choosing between drywall and hardiebacker - the latter is more expensive, but I'm concerned about moisture on interior window sills/frame. We could save a lot just using drywall - do you think that's a problem?

I actually ran into a similar problem on a past project and will only say..your concerns about moisture and drywall are justified. Go with the backerboard; it's not as good of a solution as the cut AAC but will work MUCH better than drywall

Do you think the drywall would be ok if it has gypkote (aac plaster) over it as a seal?  The contractor seems to think it will be fine and will save a lot versus the hardiebacker.  I'm still concerned.

AAC can be cut easily with a hand saw. Power tools rip right through it at some considerable expense in blades and dead saws. (The blades will still cut the block, but a pass or two and they are shot for wood. Meanwhile, dust is ferocious and chews up bearings and brushes.) Buy an old sears radial arm saw on craigslist, or a cheapo table saw at the box store. Make two passes, one on each side. Use a sawsall with a 10 inch blade to cut through the middle. Butter it up with thinset mortar; hold it in place with wood screws while the mortar sets. Or I bought this saw in Britain on the internet. http://www.amazon.co.uk/Dewalt-DW390-230V-Alligator-Saw/dp/B0001IWG6C Waltzes right through dry(!) block. One of the glories of aac is that you can dress up your house like a wedding cake if you so desire.