I would tile all the way up the wall and around the top of the window for a "finished" look. I don't think you need to tile the island wall, maybe just a nice piece of artwork or floating shelves instead.

I'd proceed w tile acc to the blue tape line you show. that leaves some plain wall so in the future you have options.IT appears you have some pitch to your ceiling and a skylight??? When all is done and eyes move around that is a nice detail and you don't need tile any more than what is indicated. Bullnose for the finished edges is fine. On the wall above peninsula...noting there is an angle to the area I could envision a contrasting paint color in a rich semi gloss for that wall. and hang some art ...it seems a bit set apart from your work zone so you can transition to a different theme visually...really nice

IMO remove the cabinets on that wall or add some to the wall with none that looks unfinshed the wall by the “island” does not need backsplash and IMO do not bring attention to that wall with accent paint. Maybe insted of cabinets on the windo wall you could do some shelving but IMO that wall needs balance then tile to the hight of the bottom of the cabinets and to the bottom of the bottom shelf

I had a similar situation. Finding a tile I liked that came with a coordinating corner bullnose was like trying to find a unicorn. I finally “settled” for using the thinnest matching pencil tile for the tile I liked, mitering it at the corner. We matched the grout to the tile and I was pleasantly surprised that the pencil tile doesn’t “stick out” at all. I ended up loving it. The matching grout was key. If you end up with shelves or a cabinet on that side you will still need either a pencil tile or Schluter edge on the side. The Schluter isn’t my thing - a bit to modern looking for our kitchen - but you can see both types of edge in the Houzz photos.

We had a similar situation and continued the tile backsplash in that spot. It is finished off with a thin pencil tile to create a border. That part of the counter is a natural place for us to place our Keurig machine and a few glass containers with the coffee pods. We hung a mirrored border vertical picture frame in the area above the backsplash and coffee maker. It adds warmth to the room and looks great. Good luck.

Is there countertop overhang where the refrigerator is to be placed?

SJ E - If you look at that photo with the blue dotted line and red arrow, the fridge will be just to the left of that countertop (where the microwave is).