Frost window, for safety use safety glass. Cover all exposed wood with vinyl molding.

Can shorten the window.

The double hung window is going to collect a lot of moisture and dirt. Here is a product to change the window look.

http://www.outwatercatalogs.com/lg_display.cfm/catalog/Master_Catalog_Vol_42/page/524/highlight/window%20tints

Mine is glass block, love mine.

Did you say that the window is wood wrapped on the inside? I can't tell from the picture. If it is wood, do you know how that detail was waterproofed. (I hope something was done) Just wanted to mention that because if it wasn't waterproofed underneath then you are going to get massive water infiltration over time which can cause expensive problems down the road. If nothing else can be done at this point, then you have to paint several coats and make sure you use silicone caulking not latex. Caulk against the window frame but also against tile on other end. Just my two cents.

Outwater also has products to help with that problem. Talk to your contractor for more info.

I would cover it with the pretty window cling films that are sold at Lowe's. Then I would have a clear shower curtain on that wall to keep the water off the window, but you could still see the window.

Cut down a vinyl shower curtain to size, and hang it like curtains over the window. I grew up with a window in the bathtub/shower, and that's what my mom did.

Thanks everyone for the helpful advice and suggestions. Much appreciated!

I think it looks great and will be s nice bright shower!! I agree, however, frost the glass!!! Will create privacy yet allow light into shower!! You could even do shower door? Nice clean look!!! Love the shelves next to shower!!! I would fill with white towels !!!!

Also had window in shower. No wood trim. Tiled all around. And used obscure glass. Very obscure. Way more private than those glass blocks. Very happy with it.

My glass block is private.

I would make a Top Down Bottom Up Roman Shade with a towel (or two). Can use black out lining for more privacy. Can pull the shade up or let it down from the top to let light in while still maintaining a level of privacy.