Why did you stop with the ceiling? And not give the windows proper casing to complete the look? I'm curious how you handled the ceiling on the other end of the room over the staircase and circular balcony.

If you're going to use tiles at the edge to form a water resistant barrier, I see no need to fill in behind them. The tiles you install are unlikely to be as thick as the old baseboard. How will you address the gap between the floor and the new tile base? Perhaps a better choice would be to install PVC baseboard and seal the edges with a sanded caulk to match the tile grout color. Unless you have a drain in the floor, making the room a drip pan will only work until there's a leak big enough to flow out the door.

So far all we have hung are the uppers and have staged the suspension rail for the base cabinets. It’s an Ikea cabinet system. The uppers are level and aligned. The suspension rail in this picture is also level. It’s hard to see in the picture but from one end of the window to the other there’s a 1/2in difference in distance to the line of the suspension rail. There’s still only 1/2-5/8in slope to the floor over 10 foot run, so window must be more un-level than floor. We’re considering getting a new window - with the way it is constructed, can a new window even be put in to be level? It looks like the drywall framing is square but not level. Second picture shows what we’ve done to account for not level ceiling.

If you do the raise, you will have to lose the windowed areas. You will cut that off at the 8ft mark (from the inside) and then create a new outdoor wall and new windows and doors, etc. New electrical, HVAC changes....etc. You will lose the skylights...and the roof will need to be patched. When do you need a new roof? I would look at doing this renovation when you need a FULL roof replacement (are you getting close??? Like the next 5-7 years?). You will be looking at hundreds of thousand to do this. You will spend the money only to lose square footage. Personally I would look at raising the flooring to the step. You will lose 6"-7" (not enough to feel squeezed under the ceiling line) of ceiling height while adding a small amount of square footage. This will give you the most for the least. No need to alter anything other than the windows.