You can sandblast the glass, if the window is in fact in the shower.

How do we protect the window from water damage?

Have it professionally painted (spray) with a marine paint such as "Awlgrip"
http://www.awlgrip.com/awlgrip-home.aspx

Install 2 shower doors. One on the window side, the other on entry side.

The window really needs to be exchanged for a vinyl window that looks just like what you have but fixed and not one that can be opened. It is just asking for trouble down the road and more cost to try to keep a wooden window in a shower. The glass in the window can be a privacy glass if you wish.