On a "This old house" episode (back when they cared), they did a floor with shellac and then top coated it with urethane. It had the look of a shellac floor with a more resilient finish. I think that your spot on with the concerns with shellac in a wet area. If it were me, I'd be looking at a more water resistant finish. I have shellac floors in some of the rooms in my house so I am not shellac adverse

Diane

Shellac has zero water resistance.

It blushes white, gets soft, and is easily damaged when soft.

Wax will waterspot too.

Remove the shellac and use Waterlox - several coats of it.

It has the amber color and the soft sheen of shellac, but it soaks into the wood and repels water.

With preparation, Waterlox can go over shellac.

Here is a link that might be useful: Waterlox FAQs

I am in Canada and don't have easy access to Waterlox. What about Watco laquer or Varathane laquer?

As a follow up for anyone in the future who is searching for this topic, I was very pleased with the way the shellac turned out.

Even though it was in the bathroom, people were fairly considerate about wiping up damp spots and hanging up towels and bathmats. The floor looked fantastic and once year I gave it another coat. It actually surprised me and I think that if people had not been careful with The floors I would've had to Retouch more often but retouching was a simple process. I did not put any thing on top of the slack and it was the regular shellac not the Dewaxed so I guess it had a bit of a wax coating to it.

We have since sold that house and the new owners did not want the bother, so they put down tile instead.