No I would not cover the window, remove it and install some decorative siding on the outside, better to live with that than have the trouble you will start by covering it over. You will end up with condensation build up and water draining into the wall.
YES, you need an exaust fan to the exterior if you have a shower or tub...not only will it get rid of the moisture in the room, but also the odors that can build up.