Bill-just got back from Tiles International which is where we bought the floor tile, grout, etc. Per their recommendation for our situation we ended up buying the Laticrete Latasil to match in the toasted almond. The grout we got is also by Laticrete-permacolor. The heights of both floors will be even so DH has decided to just do the caulk as you had recommended. Thanks so much.

We had a similar issue in our primary bathroom. The tile floor is higher than the surrounding wood floor from the hydronic radiant heating under our tile. Our contractor installed a Schluter metal trim piece and then cut a piece of wood to ease the transition between the tile and wood floor. Without the wood transition I was afraid we'd break our toes if we hit the metal trim in the middle of the night!

I also vote for tile. You don't need to go up the wall behind the toilet with it - although if you have boys, I change my answer to yes, take it up the wall. :-) Maybe a wainscott all the way around the room? It doesn't have to be the same tile as what is on the floor, in fact it might look better if it wasn't.

If you can get the treshold out u can get a lower profile one. If not you can raise the outdoor step as its a strange height anyway (about 7" would make it a very natural step height) and it is currently a very uneven surface (u might have water getting under there anyway). Please let me know if i can be of any help :-) ds