A jazzy wallpaper like this would transform the space: This paper is so fresh:

These tan stripes would look good: This treatment looks good:

I'd suggest keeping with the retro vibe: If the floor is grey, you might paint the walls to match, otherwise look for a shower curtain that uses your existing colors:
http://ep.yimg.com/ca/I/bedbathstore_2261_383930582.jpg
and pull your paint color from the background. Your curtain should fit inside the sill, and would look well if it were a 3/4 cafe on a tension rod.
Finally, something fun for the walls:
http://cdn1.bigcommerce.com/server1900/efc47/products/1917/images/2018/images__73323__45681.1348588582.225.225.jpg

How about this paper?

Or just painted wall and this fabric

I would play up the art deco and go with as many mirrors (IKEA sell 4 square panels that you can stick on the wall no probs for $) I would then introduce copious amounts of black and white - shower curtains in stripes, the curtains over the window - add black bath mat and then lots of black and white prints.

The tiles are beautiful and special...it's the drab and draggy curtains, sagging and yellowish, (shower and window) that make it look dull. Whatever you do, you must banish shades of yellow or any yellowish whites. Go for pure white, grayed white, maybe even slightly "browned" white, just no yellow!

Nancy shows taking it tailored with toile paper and shutters. Huge improvement and shows that the tiles are an asset.

You could also go more modern with walls painted white or pale gray and again with shutters or a simple blind. Then just 1 or 2 powerful accessories, perhaps in an Art Deco style.

I would just like to say that I haven't actually moved into the house yet... these were the pictures the landlord sent. I would NEVER hang those curtains in there! :-)