I wonder if you paint it the color of the cabinets, if it will just "go away".

Have you considered moving the light switch so it is all the way under the cabinet and can be tiled around? Sometimes there is enough play in the wiring to do this. Alternately could you have the switches on the other side of the wall? You switch the box so that its facing into the adjacent room. I had an electrician do this, but you could probably DIY.

If not, I would consider tiling all the way down, yes.

I was also going to suggest moving the light switch over. Now would be a good time to do that. But if you can't, then I think painting the wall there the color of the cabinets is also a great, and inexpensive, idea.

So my question is, why can't you just cut the tiles and tile around the lightswitch?

I've never tiled a BS before, so maybe there is an obvious problem I am missing with that.

I personally would not tile to the trim. It looks like it's "sticking out" to me that way. The cabinets and counter end in a clean line and then there is the BS sticking out past that. I would go to any hassle to move that light switch if my only choice was to tile to the trim.

This is a situation I hate. Short of moving the switches (which isn't always possible), there's no real winning solution. I even talked a friend of mine this summer (who just happens to be an electrical contractor) out any backsplash at all, other than the 4" one that came with his countertop, just because of this, and he said those switches couldn't be moved, because of the way the framing fell, without opening up about 20" of the wall and redoing the framing.

If it were up to me, and I had no choice but to deal with it, I'd tile that little space from the side of the cabinet to the door trim.

I had the same problem and this is how I had it done. I think it looks more finished tiling between the cabinet and the door trim. I also had the tile guy go up one tile above the bottom of the upper cabinet.

I'm for tiling all the way down or you could try painting cab color first and see if that's OK. All you would need is one of those little tiny tester jars of paint. They have them at Benjamin Moore. Don't know about other places.
Lisa

Visually I like Abananie's solution!

Another vote for abananie's method :)

oh, yeah, do what abananie did. looks great!!

Thanks for your input. I had to make a quick decision about 5 minutes after I posted. And the winner was...

Exactly how abananie did it. It just looks more finished. I made the decision before seeing her picture and now feel even more confident after seeing her finished result and my almost finished result.

They are grouting as we speak and I can't wait to be done!