Although the rule says where tile abutts a dissimilar material, it's also industry standard to grout the tile to the drain.

I think your plan is ok with exception to how you plan on grouting over the cracked tile. Grout needs a pretty good space to adhere, a hairline crack isn't going to take grout. I would be worried that crack will cause you a water leak. I know there are some experienced tile people who frequent this forum, so hopefully they'll chime in. I would also suggest you post the same response over on the bathroom's forum. There are some master tile guys over there. Anyway you can get a replacement tile that will match the existing tile? That would be the best solution, even if it's not an exact match. I think the crack in the tile needs to be fixed somehow before you can regrout anything.

If it works for you, that's good enough for me. What brand do you use? Is it water cleanup or paint thinner cleanup? Most marine varnish says for exterior. If you call the phone number on the can, they can tell you if it is correct for interior but like I said, if you've had success with it then that's what to do. You have to like it. In any case, nitro cellouse lacquer has lacquer thinner as the carrier. There is also a waterborne lacquer. For your purpose I would suggest the waterborne type. It is more impervious to water after it dries. Some water based finishes require sanding between coats and some don't, but make sure you follow the instructions on the can concerning what stain to use and surface prep. For sanding between coats you could 220 sand paper or the pads put out by 3M (they are like kitchen scratch pads and come in different grits). You just need a light sanding to get purchase for your next coat or lightly sand out runs. If you use a tack rag, use one made for waterbase finishes. If you want to brush on the waterborne finish I suggest General Finishes products. They are expensive but are more user friendly than products like Varathane. You can go to their site on the web and get a lot of information. If you want to use aerosol cans, I suggest Deft waterborne spray. If you choose one of these methods, there is a cardinal rule you should follow. Don't pratice on the piece you are refinishing. Get as large of a piece of the type of wood you are refinishing as you can and pratice on that. There is a learning curve but not one you can't surmount. The hardest part for me was always taping off. You want to tape in a sequence so you are not applying tape over a newly painted surface. I said to stain before installing so if you don't totally get off all the clear caulk, it won't show up as a light spot on the finished molding. If you decide to use areosol, then just get one can and pratice on your pratice board. If you decide to hire someone to spray, have them use Hydrocote Resisthane Plus, and tell them not to thin it. I don't think you need to hire someone. If you like brushing then take your time and use the General Finishes products or use what you used on your other molding. Make sure you locate and mark your studs and predrill the nail holes in both moldings with a drill bit a little smaller than your nails diameter so you don't split the wood.

I thought I was a smarty pants on this forum once before and was like no, definitely grout....Well, it did end up cracking and when I called the co they said it would certainly do that and they come back and clean it a little and caulk right over it so the caulk sticks to it..I was worried about the caulk line but it's so nice and thin and done very well to match exactly...I can't imagine it being done right if it's ALREADY doing that....I bet it's an easy fix though.