Note that I truly appreciate the responses and while my comments below might sound terse, please do not take them as defensive or confrontational. I'm just trying to give you the background perspective that has brought us to where we are now. Do you really need the light in the fan plus the wall sconces in a room that small? The wall sconces are a recent design decision. We purchased the light/fan kit a long time ago (over a year), so we're going to use it. Additionally, most of the time the ceiling light would be the most appropriate lights source for the room. In "public" powder rooms, I try to keep things simple. I prefer to have the fan and light on the same switch. A guest turns on the light the fan turns on too. In our house, it is considered sacrilege to have the fan and light on a common switch. With the devices on separate switches, our fans, at most, spend less than 5% the time on that the lights do. I think I'd put the nightlight on a photo sensor instead of a switch. Even though the nightlight is only 4W, it will only be used a few minutes a week. It seems like a waste to have it on for (on average) 84 hours a week, just for 5 minutes of actual use.

14-3 is best practice with that you keep all the colors on the wires right the other way to do it is to run a 14-2 splice the I the outlet to the white ran to the switch and put the black from the switch onto the outlet an dont break any tabs on the outlet. Use the existing neutral in the outlet for the outlet. So when your done the only black on the outlet is from the switch. On the switch tie the black on one screw and the white on the other. The white is not a neutral in the switch it is now your hot because you tie it into the hots in the outlet not the neutral. The neutrals stay at the outlet at all times in this scenario.

It sounds like you have a wiring connection in the wall that went bad, most likely between your last working light and the first non-working light. Unfortuneatly if the wiring is buried in the wall you have to ask yourself how much you like your lights and try to access the wiring. Something else you may check but probably won't end up being the problem is the switching. Sometimes multiple switch legs are ran from the switching location and maybe you have a bad connection in your switchbox. Hope this helped good luck!

I'm not sure about the WWII copper shortage. That's just the "story" I heard. Doesn't change the safety issue. Here's an excerpt from a website that attributes the 3 wire "legalization" to the post war housing boom. A little dubious because 1947 seems to fast after WWII for a housing boom. http://www.dli.mn.gov/ccld/PDF/eli_GFCI_history.pdf Circuit grounding was one of the more hotly contested topics in the early history of electrification. In the early 1890Âs, the New York Board of Fire Underwriters had condemned the practice of grounding the neutral as a dangerous practice, especially in a 3-wire Edison (120/240 Volt) system. The Edison utility companies, on the other hand, found just cause to ground their supply systems, even as others thought the utilities were doing this to just save copper and money at the cost of an increased fire risk. The great debate continued for over a decade, but in 1903 the Code was revised to recommend that these circuits be grounded, and finally in the 1913 Code a mandatory circuit grounding requirement was included for circuits like the popular residential Edison 3-wire system. The permission for neutral grounding, the practice of using the neutral conductor as an equipment grounding conductor, was first permitted in the 1947 Code for electric ranges. At around that time many electric utilities were promoting the use of residential 240 V cooking for the post WWII housing boom, and many were even offering to install an upgraded service to older homes at no charge. However, there were no NM cables available at the time with conductors of sufficient ampacity to handle these higher amperage branch circuits. There were, though, service entrance cables of sufficient size, but they had a bare neutral conductor. This special Code permission allowed the frames of these large appliances to be grounded through the uninsulated grounded neutral conductor of the Type SE service entrance cable used to supply the branch circuit. The use of neutral grounding was also extended to electric clothes dryers in 1953. However, almost 50 years later, this special permission for neutral grounding was taken away in the 1996 Code for all but existing branch circuit installations.