It's too bad that detail was missed during the layout and design phase of the shower. I'd hate to see the rail left off that fourth wall, unbalanced installations look...well...unbalanced. If the escutcheon plate can hide the cut edge of the chair rail tile then that'd probably be the best compromise; scribe the chair rail to go around the escutcheon plate. The reason I'm not a big fan of scribes like that is in the event the valve is ever replaced. Sure, it might be 10 years from now, 5 years from now, or never. But the scribe will come into play for the new escutcheon plate. If you do scribe it to fit the valve cover plate, keep a couple of pieces of chair rail tile as "extras" for that day way down the road. Just in case. There are a few alternatives, but they involve tweaking the tile design. Some changes can be local, just around the shower valve. A "box" border around the valve with the chair rail butting into the box border. Some changes can be wholesale. But the easiest would be to scribe the chair rail tile around the valve's plate. Just as long as the cut edge is covered by the plate it should look fine.

Should we frame the niche with the chair rail molding? That IS a possibility: However, so is what your installer wants to do. What he'll do is cut a 45 degree miter on the end of the last piece, and then cut a 45 degree "plug" for the end of it, more or less making his own outcorner. I've done the same thing before, as shown in the following pic, where the chair rail stops at the corner leading into the shower:

I'm with GreenDesigns, tile the wall. I would think you could notch out the cove piece if you need to, to have the feet fit the coved area, and the back of the cabinet flush to the wall. It's easy to drill through tile, but do excellent planning before the wall board and tile go up so you have mounting blocks all across the vanity length. That's what I would do, then I wouldn't worry about hitting a stud for the mounting. If you ever have to change out the vanity you will have options when the wall is tiled completely.

Walker Zanger 6th Avenue has a white gloss but not sure how white it is as I was focused on finding a blue. This is Walker Zanger's more "affordable", "quick ship" line from what I've been told and more affordable than most Pratt & Larson for example which I also looked at. (I'm using the WZ pale sky gloss in a 6" hex for a bathroom project that has yet to begin.) It has lovely mouldings and does have bullnose pieces. However, the mouldings are expensive, even in this more "affordable" line. Luckily I don't need any of the molding pieces. https://www.walkerzanger.com/collections/products.php?view=mat&mat=6th+Avenue&coll=6th+Avenue You could also consider Sonoma Tilemakers Stellar Quickship Collection which is also "affordable". In the Steller Quickship line, there is a "Blanco" gloss which is white (can't remember how white it is though) and there are lovely mouldings and bullnose to choose from. My mom used the 4x8 bossy gray from this line for her bathroom backsplash, including bullnose pieces. https://sonomatilemakers.com/stellar-quickship/ If you have more money to spend, Sonoma Tilemakers' regular Stellar line (not the quickship) has "Pure white" in addition to "Blanco" and even more liners and mouldings to choose from. https://sonomatilemakers.com/stellar/ To give you an idea of pricing, for me, the WZ 5th avenue 6" hex is approx $24/sq ft (w/o contractor discount) or $19.50/sq ft w/discount. The WZ 3x6 bullnose is approx $9.50 per piece (w/o discount) and base moulding is approx $21 per 4x8.5" piece (w/o discount). Sonoma Stellar Quickship (for the bossy gray color at least) was approx $18/sq ft for the 4x8's (w/o contractor discount or $14.50 w/discount) and $25.50/sq ft for a non-quickship glaze (w/o contractor discount).