but just protect the tile floor with something that could take a blow--like particle board.
Maybe look beyond a tub surround if you may want a modular unit later.--???

...on you not dropping a hammer through the ceiling, or being too violent with the common wall.

From your description this is currently an external wall, which may well mean the nails fastening the siding could well and truly be rusted in place. Unless that siding is willing to come away easily, your best bet may be to batten OVER the boards then fasten your wall material to the battens. Use screws rather than nails.

Couple of useful bathroom/general renovation tips.

- Vaseline will prevent silicone sealants from sticking to glass/tile. Clean up only after the sealant has fully set.
- Use masking tape when running long beads of silicone. Lift it before the sealant sets.
- Fingertips cut from kitchen gloves will help prevent blisters while grouting tiles.
- Always ensure that there is a small gap anywhere drywall meets a horizontal surface. This one applies EVERYWHERE.

key historical feature of an Italiante roof! Do you have enough space to build out instead of up?

clapboard instead of stucco, a porch with limited gingerbread. It was built by a middle class working farmer. There used to be a very steep back staircase up to a handyman's room that was never finished inside until a brief conversion to an up and down duplex. There are many similar houses in the area. Some have had the flat roofs modified, others were built with a hidden peak - just steep enough to shed water. Flat roofs really don't work in the rain shadow/snow belt of Lake Ontario. Trust me though - we won't be re-muddling!

...and the substrate is attached to the walls properly.

Don't use drywall or green-board for a substrate in this case as the nails might pop or, in the worst case, pull through if there is any movement. You should never use drywall/green-board anyway unless you are using one of the latest state-of-the-art surface applied sheet membranes like Kerdi membrane or Noble products etc. In this case I would definitely stick to cement board.

I prefer HardiBacker cement 1/2 inch for shower walls attached with their 1 5/8" inch backer-board screws. Home Depot carries that product.

I prefer a surface applied (painted/rolled on) vapor/moisture barrier on the backer board (Redgard at Homer's) versus plastic sheeting behind the walls. This keeps all the moisture INSIDE the shower versus permeating through the tile/wall and condensing on the plastic to drain back in the tub. This also makes tiling easier as the cement board is sealed so it won't suck your thinset dry too fast.

I would use a GOOD QUALITY latex fortified hand mixed thinset (versus a mastic or premixed). The latex additive will give you the extra bond and protection against movement. Latex fortified thinset is a must-use for any glass tile anyway. I prefer Mapei Ultra-Flex 3 (Menard's) for all my projects. It's a bit pricey at $37 bucks for a 50 pound bag versus , say, $18ish bucks for the stuff Homer's sells.