Why are you changing out the shower tile? If it is the same as the offset square white tile in the picture, I think it looks nice in white. It would be easiest to keep the tile you have!

But if you have a good reason for changing the shower tile, I think it's a good idea to match all the tile you are keeping. I have painted grout before, and it went well, but I'm unsure how it will look in your case, with black grout paint. I guess all you can do is try! The grout paint is inexpensive.

In general, I like your tiled walls, especially with kids in the house. I'd keep the same height of tile that you have going on in the left side of the picture (not that weird tall part on the right side of the window).

What is the style of your house? If you have a lot of that modern farmhouse vibe in your house, then board and batten makes sense, I guess, but in a small bathroom like that, I think I prefer the tile.

In order to help with style questions, it's helpful if you provide an overview of the style your house currently has, or the style you are aiming for. What is the flooring in there? Are you changing out the vanity?

Thank you for the feedback! The shower needed to be re-tiled. It was old and moldy. I may try painting the grout of the square tile, but it's really not the best tile install, so that's why I'm considering replacing it. I just don't have the time or budget to replace it with more tile, thus the wainscoting and painting options.

This is the style I'm aiming for, but on a budget:

https://i.pinimg.com/564x/bc/16/70/bc1670ef60454bee53e61e2ea6a74987.jpg

I plan to replace the floor with sticky tile like this:

https://www.lowes.com/pd/STAINMASTER-Stainmaster-1-Piece-6-in-x-24-in-Groutable-Chateau-Peel-and-Stick-Concrete-Vinyl-Tile/999957691

And I may replace the vanity with "LILLÅNGEN / TÄLLEVIKEN" at Ikea.

Well, I like the inspiration pic! That's a neat way to do the board and batten look, sort of echoing the rectangular subway tiles. I think you're on the right track, either way, either that design, or the tile.

If you're re-doing the tile yourself in the tub/shower area, are you using a good waterproof method (not that I know anything about them, I just know that you need one)?

I'm worried that you think you can solve mold by replacing the tile?????

I didn't just remove the tile. I went down to the studs and started from the ground up.

Mainly I'm just trying to figure out what to do with the old tile outside the shower. I'm tempted to remove it leaving the drywall and cover it up with some decent plywood, trim it with some 4x1 pine and paint it white. I was looking at some beaded birch panels, but those come pre-finished. I'd have to add a couple coats of primer not to mention they're double the price of some decent plywood.

The tile in the inspiration photo appears to have gray grout. I suggest you mock up some tile with grout to see what it looks like. A dark gray can result in a significant contrast. I don't think I've ever seen black grout. I actually like the white tile. To save money, I suggest option C and not painting the grout, but that's just me. I prefer a subtle contrast in the shower. Make sure your investment goes into waterproofing the shower.

By the way, I love the inspiration photo. Good luck.

I would actually put in a new wainscoting to 3' in the same subway tile and redo the drywall above, but that's because there is a male in my life who cannot aim to save his life.

You waterproofed the shower, right?

So don't go as high as the existing tile and re-tile it? I definitely don't have the time or budget to re-tile the walls. At the moment I'm leaning toward removing the tile and adding wainscoting, but I'm unsure of the time and difficulty of cutting and attaching it.

Yes, the shower is waterproofed and is now complete.

I decided to remove the old tile and use PVC bead board planks. I like that they aren't that cardboard-like material of the bead board sheets. Also, I've decided on a floor:

https://www.mannington.com/Residential/LuxuryVinylSheet/Decorative/Lattice/130400

Nice floor! The fact that it is sheet vinyl is such a plus in your situation. Hope the PVC beadboard works well for you, too. It is good that there are so many ways to achieve the looks we want these days!