You have an old "mud-set" floor (with an abundance of mud!). I think you're going to need to tear it all down to existing subfloor and build it back up. You may even find it beneficial to rip up the subfloor, but you'll have to see. I'd look at ripping some 2xs to shim up the joists. Do verify spacing of existing joists to make sure it'll all be rigid enough for thinset. It's probably ok.

@Seabornman Thank you! what do you recommend I build up with to get to the level of the hardwood floor in hallway. I was originally going to do plywood with cement board on top and then tile but It will still come up about an inch shy of the hallway.

Then I'd probably screw down some 1x4s over the existing joists before screwing down plywood. Or 2x4s if taking out the subfloor. You may have some shimming and adjusting to do as existing subfloor didn't need to be level (due to use of mud-set), but yours does. You should plan on a threshold at the door, if there isn't already one. It can take care of any remaining difference in floor elevation.

Your deflection rating will need to be assessed. Deflection ratings are CHANGED (increased) by adding PLYWOOD. Cement backer board is NOT structural. It is always advisable to use TWO layers of subfloor. The first layer is attached to the JOISTS (the slats you see are the first layer and are considered 'useless' with tile so you might as well get rid of them).

The second layer is then screwed to the FIRST layer (do NOT 'screw and glue'). The purpose for TWO layers of subfloor = the top layer is EASILY removed if something changes/goes wrong (glue causes issues with removal = damage to bottom layer = more problems then it is worth).

Right. So now you know you need TWO layers of plywood. You can get two layers in there with a total of 1.5" (3/4" + 3/4") worth of 'thickness'. Now you have the RIGHT deflection rating (super important) and you have added quite a bit of height.

Now you assess how much extra height you need. A well installed porcelain tile can sit (roughly) 3/4" high. You can add cement board to make up the little bit of difference.

There you have it. Two layers of plywood + cement backer board to make up the difference.

Are the tops of the floor joists flush with the bottom of the subfloor in the hall or were they lowered to allow for the thickness of the mud base?

@HALLETT & Co. I'm not sure I haven't removed all of the existing floor to the hallway. will that effect what I should do?