Can you post a pic looking up? Hard to tell where there is room to do that.

Thanks. Added two photos. Maybe I can just have a smallish shower head mounted up as close to ceiling as possilbe

I understand you wanting to not see the shower head, but if you mount a head up where you can't see it, it will be extremely close to the ceiling. Not sure that will be good for the ceiling and humidity inside the soffit.

Would a hand held on a bar be more aesthetically pleasing? Can the soffit be removed?

possibly the hand held on a bar. I will have to research that

The fact is where water is will be water spray so maybe a rainwater head but that tub looks tiny and not attractive with all thta stuff at the faucet as it is now a shower head would be 1/4 of that. Are you removing the tub ? IMO it needs to be at least removed to do the waterproffing for the new shower .Do you have any idea what is in the soffit?

can you remove the soffit? I'd check out that option first. make the entire ceiling higher and one level.

complaining about seeing the shower head is kind of weird. you could do a low profile, minimal look, and I thin it would work.

are you keeping that exact tub? do you need the tub?

personally I'd demo the entire thing, including the ledge and soffit, and make a larger shower

" personally I'd demo the entire thing "

Goes without saying, cannot just change the tile tile. That is a tear back to the studs or do nothing.