Custom's thinset is fine. I've used it many many times, and have never had a problem. One thing I advise anyone purchasing cementitious products at box stores to do is to make sure the bag is soft and supple. You don't want a stiff or hard bag, that would indicate that it's been sitting on the shelf for too long and has possibly undergone partial hydration. Now also don't confuse a "hard" bag with one that was compacted by being on the bottom of the pallet. I've used unmodified with Kerdi. I've also used lightly modified when working with medium-sized tiles, say 12" squares or less. Larger than that I'd stick with unmodfied. And for what it's worth, I was using the modfied with permission from Schluter's tech department. For Custom's thinset, that would be their VersaBond. VersaBond is lightly modified, FlexBond is highly modified. But yes, your tiles will adhere with unmodified. The larger the tile, the flatter your subfloor has to be. Any humps might result in a rocking tile, or lippage between two adjacent tiles. With larger tiles you sometimes need more thinset to play with, so you're looking at upping the trowel size to a 1/2" notch which in a perfect world will give you 1/4" thick thinset between the tile and the subfloor. Set a tile, then slide a trowel underneath it and pull it up. Make sure you have continuous coverage underneath, no uncompressed thinset ridges, etc. It sometimes helps to backbutter the large tiles too. Use the flat side of the trowel to burn in a thin layer of thinset on the bottom of the tile. If you do that you might not need the additional thinset that a 1/2" notched trowel provides.

I faced this decision last year when we remodeled. I was set on not taking the tile to the ceiling but at the last minute changed my mind. I am so glad we did tile to the ceiling. It makes the shower look bigger and finished. Now when I see tiled showers that stop short of the ceiling they look dated to me and a missed opportunity.

Do you like the Mission style shown in the Rejuvenation catalog? Rejuvenation has some bathroom towel bars and other accessories, but of course their strength is in the lighting.

Can you use the casing from the rest of the house on the sides of the bathroom trim, then do the top and bottom as in your inspiration photo? Then later if/when you would like to change out the trim in the rest of the house, you just cut off and replace the tops and everything would then match perfectly. Or, do the bathroom the way you want, then later cut off and replace the tops of the mitered trim and everything thing would then almost match. I too like the craftsman look and have mitered trim, so the above approach is what we are considering doing one day. DH says he doesn't even need to pull the casing off the wall to cut off the top! Replacing trim is expensive and wasteful, and painting trim is a PITA, and this would be a good middle ground :)