It will look disconnected and an afterthought. Like it belongs on another house. And like a contractor talked you in to something expensive just to make more money.

Also, why dont you have a design professional involved here? Contractors don't design. They are really good at selling things that people don't need though. Can you afford the big loss of value to your home of eliminating a bedroom in addition to the big costs of adding a bathroom?

"that was the ranch with the fancy bathroom on the back".

i think i'd keep it the 8' height and spend money elsewhere.

Vaulted bathroom in a ranch doesn't make sense. Another consideration is, if you live in a climate that has real winters, remember that heat rises and a vaulted ceiling may result in a chilly bathroom.

There is no way to evaluate the situation without information on your climate. Do get skylight!

Skylights are appropriate but a vaulted ceiling in a bathroom makes no sense and I happen to like my 50s 8’ ceilings if I was ever to think about a vault it would be in the LR since that was pretty normal for those homes. I would use that money you save toward nicer finishes in the bathroom. Where is your designer in this process , a contractor is never a good choice for design.