Mud walls are far superior when compared to lightweight shower construction. An added bonus...with the reinforcing mesh wrapping the corners from wall to wall, there will be no dissimilar movement. So you can grout the corner joints instead of having them caulked. The only place where they can sort of get funky is the exposed edge of a mudded wall, where you can see the thickness of the mud wall. If your existing framed walls are out of plumb, then the mud man will float the new walls perfectly plumb. So on that exposed edge, your thickness of mud might vary, from 1" at the floor to 1-1/2" up high, for example. If your existing walls are out of plumb, it's an issue you can talk about with your man ahead of time.

Dense Shield has a vapor barrier within the product. Poly behind it could create a vapor envelope. Check with manufacturer. I'll suggest USG foam board. three times the density of Kerdi Board. Avanti's methods of sheet membranes are great choices. The foam board would save the DIY'er labor and eliminate margin for error. Dense Shield relies on caulk in the corners for waterproofing. I personally would never install a system that relies on caulk. What is the waterproofing system to be used with the mud set drain? ( Pre pitch - liner - mud OR mud and membrane?) Waterproofing on the top is a much better method. Research Schluter - Kerdi, Laticrete - Hydroban, USG shower system, Noble. See which system is available in your area.

How do the pros on here advice the OP in terms of any possible firing? OP said this is a very large 6-figure project involving an addition, kitchen and a bathroom. What if they are going a good job in the other areas of the house? Does anyone have any experience in firing a contractor from only part of the project? What I mean is, could they negotiate to take the bathroom off the table, refund the customer for that part, and then proceed to finish the rest of the addition and kitchen? I have no experience with firing a contractor so I don't even know if this is something that is done. OP, are they doing a rgeat job in other areas? Seems like showers are the hardest thing to get right, way harder than kitchens. It seems like there are more complaints on this forum regarding showers that almost anything else. Pros, is taking the bathroom off the list even a reasonable thing for OP to consider? I imagine that would be a pretty tricky negotiation. Maybe putting a stop to bathroom, having them finish everything else, and then come back to the bathroom discussion after the rest is finished, so that everyone can cool off, and they will have time to get an independent inspector in there (while things are torn apart and walls are open), to give a non-biased report of the problems? Then after the rest of the addition is done, OP and GC can negotiate about how/if to move forward on the bathroom. If this is even a reasonable approach, OP you should withhold the entire bathroom amount until the end of the project.

I wouldn't worry too much about the wall/ceiling juncture. It's not going to get wet or moldy there. And I can tell you this from considerable experience, based on having demolished hundreds of old bathrooms: you never seen mold or water damage there. Ever. It's always down at the base of the tub or shower. That's where great care needs to be taken to ensure a waterproof seal at all junctures. The drywall wall-to-ceiling joints elsewhere in the bathroom need to be taped, though, as they will crack if not taped and mudded. But this is not a waterproofing issue. Yes, it is very important to seal the base of a tub or shower well. But at the top of the walls? Nah. They're fine. If the tile setter is competent the tile work will be snug to the ceiling and caulked there.