I really like the idea of running the tile up to the ceiling since you are doing a full height splash. This will look sophisticated and custom:) you could also add a wood transition piece as shown below for an extra element.

I second InterMix Interiors comment completely! It's a small space so cost of extra tile shouldn't be that much more for what a custom look it will give. Definitely go for it! It will give you a very finished look.

Looks like you are off to a wonderful start!

It's great. I would consider having the tile go around the walls it is on at the same height - so yes - all the way up!

We tiled all the way around our window in our kitchen remodel seven years ago.

I love your subway tile (and white cabinets sigh)...I'm lobbying OH to replace our tile with the same.

I love your wood, its very rich looking.

I agree with everyone, tile all the way up the wall. If you haven't all ready tiled around the window, remove the bottom molding from the window and install a window sill.

It looks amazing Sylvia!