Thanks you guys for your input. I won't be doing anything to the cabinet. The cabinet builder had done the work and I don't want to fuss with it now:) The original building plan was for the tile to be recessed into the side, butting up to the frame. But I built out the cabinet wall more fully than the initial plan. The plumber thought I needed to do the build out to correctly get the tub's tile flange covered. The hardy backer was originally going to set on top of the flange but the plumber would like to see it over lap the flange. So that is what I did. Hence the tiling surface is now too shallow to go with the the original plan. I had thought of the skinny tiles all the way down the frame but I don't like the look when I mock it up. I liked option #1 because it was efficiant in its design and has a clean look. But I worry about maintainance. If I do #1 I was planning on caulking the gap before tiling, painting with Hydroban, tile as usual, than caulk the seam between the wood and the tile. Any more thoughts on these ideas?

We were told the same and are getting a 1/4 round edge. I'd rather be safe now than sorry later.

Just got a new countertop and, carelessly, I kind of thought I was all set to get a straight edge based on my pre-install conversation with the measurer. But sure enough, my contract states 1/2 bullnose. I prefer eased, as one of the previous posters. It's what I had in my previous location. I do have a functional peninsula which has a large overhang and my agent is trying to convince me it's more practical and it turned out this way for the best. And I admit, I can't quite see it being an eased edge, with its arced shape. I also found this article: http://www.kitchenbathdesign.com/879/reasons-to-round-over-your-square-sharp-edges/  which argues 1/2 bullnose or similar is the way to go, from a functional standpoint. There's not post-installation straightening that can be applied? Maybe I'll learn to like it. At least the inside of my sink is an eased edge.

I agree with all of you who settled on the metal strips and with Michael who says it looks great. After hours of research and going out to search for the right finishing trim in ceramic, porcelain, marble, stone, you-name-it, for my white beveled subway tiles, I came across a gentleman in a store who advised me to take a look at the metal edge transition strips for tiles at a neighborhood tile store. I finally settled on a curved (not straight or squared edge) bullnose satin nickel stainless steel trim to hide the unevenness of the thickness of the tile cuts, avoid any chipping, and also to match my bathroom fixtures. My white beveled subway tiles look beautiful! The store had a sample shower niche with the same bullnose metal edge and it looked very nice and modern and had a clean finish. Best to you on your projects!