Instead of doing a traditional bathroom fan with light, I would suggest installing a ceiling recessed fan. It looks like a recessed light when installed. The fan and light can be controlled separately.

Yes that's fine with the recessed lights but you'll also need sconces on either side of the mirror if anyone uses that mirror to put on makeup, shave, etc.

The mirror is a lighted mirror. Should provide plenty of light for task.

^^^ A lighted mirror would not have worked in my arts and crafts bathroom. So glad you like lighted mirrors. I'm guessing just as many of us prefer not to have them. I find they cast a ghostly glow when trying to put on makeup.

A wall hides the toilet - want to say why it's to be removed? Some place sconce on that side wall - and doesn't have to overtake, doesn't have to be large.

I’ve never understood ‘hiding’ a toilet in a small bathroom, all bathrooms have toilets! Toilet in a separate room I get, but to me this room would feel so much larger without the wall… obviously just personal preference!