I don't know how fabulous it would look, but I have a window with patterned glass on the side of the house that faces the neighbors. It obscures the sight line while still letting in light. Of course, you can see silhouettes, especially if you stand near the glass. Mine is the rain glass pattern. I've posted a link to a random site that shows the glass.
http://www.doorandwindow.com/windows/glass-glazing-treatment/obscure-glass-windows-with-mystique.php

Here is a link that might be useful: Patterned glass

I had a custom stained glass window made for my bathroom. I now get lots of light and don't have to worry about privacy issues. Here it is posted on the bathroom forum.

Here is a link that might be useful: Bath Reveal

Will people be able to see in the top half of the window? When I put in a half bath in my basement, I used a regular double hung window, and lucked out by finding a vintage stained glass piece on Craigslist that provided the needed privacy from the outside. and was a perfect fit. You might choose to have something made that blends with your decor.

This pic shows it as I bought it, and I wanted more privacy.

This one is after I put 'clear' contact paper on the parts that had clear glass. It gave it a frosted look and was very easy to do. You could buy one to your specs.

Thanks for the ideas! Our situation will be very similar to Kew2006's -- 2nd floor 'statement' window in a stone wall. Different architectural flavor, but really - very similar.

Great bathroom Kew!

Custom shutters. Neighbors renovated and have quite the statement window in front. It is also a bathroom. She had shutters installed. It looks great from the outside and I am sure from the inside as well.

there are many window films available that provide various levels of privacy and can look quite good without blocking the light. Beyond that, there are many window treatments that provide privacy yet allow light, from sheers to top down, bottom up to cafe style.

Lots of ideas in the thread linked below

Here is a link that might be useful: window treatment ideas

I used a window film that obscures shapes without blocking light. Over this I have linen drape - so I do get some light and 100% privacy. This window is centered over my tub.

However I also have two sky lights - one over the toilet closet and the other over my shower. These are a a fabulous source of natural light. If your bathroom is on the upper level of the house, then you should be able to use skylights.