I forgot to fix my pic....here it is

Be sure to check the directions on the specific panels you're buying. I'm thinking those panels normally attach to the studs vs to greenboard/whatever, but maybe you need the the extra thickness to have the panels sit inside the tub? What do the product directions say about installation? If you need Durrock (or whatever), you could either put a polyvinyl sheet against the studs under the sheet or paint the sheet with Red Guard or Hydro Ban. Considering you're using vinyl panels, I think I'd go with the much less expensive polyvinyl. (We did tile, so went with Hydro Ban, but tile isn't panels.)

Hm, I had been wondering if you'd taken the past surround *down* or just put the new surround over it. If you've *taken it down* and you didn't see any rot behind the sheetrock when you removed it, then I'd venture to say that you're safe. There was *no* black or otherwise unpleasant anything where the low point was? Checking downstairs will eliminate the other one possibility, which would be that the rot went straight down and didn't communicate upwards at all into anything you removed. Which would be odd, but I guess possible. Maybe you just had *really good* sealing. We don't.

first off, that is a horrible niche design. Cutting the tile to border the metal edging is not needed. throws off the tile design. if you want a niche, again, do the math and place it where it can fall symmetrically between full tiles. like this one. nice and neat. use a metal edge like a Schluter Jolly for the border, or see if your tile has a liner or bullnose feature. secondly,,,tile layout depends on what the manufacturer recommends. most of those tiles in that size should be placed on a 1/3 offset, not 1/2. it is because of bowing and cupping. some tiles are not perfectly flat. place two tiles back to back (or front to front and see if you see light between them or if they are perfectly flat to each other. Whatever tile you buy, they should have specs that tell you the grout width, and the way to lay them. I do like the first tile w/no offset. but if you want this one above, try for a 1/3 offset layout. there are a few ways to do it. Both of these are 1/3 offset. nice niche above, this one below, meh. should have been larger and fit within that one full tile. And watch those corners. you never want a small sliver cut. The one pictured is ok. I just dislike how they did the niche. 12x24 tiles w/a perfectly placed niche. and the tiles are finished on the outside edges. see how it fits between those tiles w/no tile cuts around it? this one too. placed perfectly between full tiles. you must do the math on a dry layout and tranfer those numbers to the shower wall, placing the niche exactly where your tiles will be laid. another excellent measured niche. full tiles above/below, no sliver tiles in the corner, the niche was bordered on the inside w/full quartz pieces and a mosaic tile on the back. very nice. Outside edging is a type of liner in that same tile design. bullnose edges would also work here