I've set more than my fair share of wall tiles, too.
I don't see any problem going all the way up to the ceiling in the shower, and I don't see any point in tiling walls that won't be in a wet area.
Tiling walls that aren't in a wet area, in my view, is only creating potential problems. If someone accidentally hits one of those tiles with something hard, it's going to crack the tile, and the repair is going to be a lot more difficult than repairing a gouge in drywall.
Ditto for stains. Unless you seal your grout, there's the possibility of getting a stain in the grout if you splash the wrong stuff on on a tiled wall. You can always paint over drywall to "fix" stained paint, but you need to replace stained grout. Almost all of the maintenance issues homeowners have to deal with when it comes to ceramic tiling involve maintaining the grout. Why give yourself more work to do by installing more grout than you need to?
What I'd recommend you consider is using a product called "DenShield" which is made by the Georgia Pacific Company. It's as strong as drywall and as easy to work with, but it's as waterproof as any cement tile backer board on the market. You shouldn't have any trouble buying it in any major city.
Georgia-Pacific DensShield Tile Backer
It comes in various sizes and thicknesses, including 5 foot long by 30 inch wide panels for tiling around bathtubs and 4 foot by 8 foot sheets for tiling floors. You cut the stuff just like you cut drywall, it weighs about the same as drywall, and because the core is gypsum (like drywall), it provides the same fire rating as ordinary drywall.
My sister had a flood in her basement a few years ago, and I was in charge of repairing the resulting damage. I was too busy to do the work myself, so I walked her and her husband through each step of the repair, so they were the ones to actually do the work, even though neither one had ever done any renovations before. To prove to them that Denshield was what they wanted to replace the water damaged drywall with, I salvaged a piece from my local supplier and left it submerged in a bucket of water for a week. When I showed them the piece of Denshield at the end of that week and the perimeter of the DensShield was wet to a depth of about 1/8 inch, but once you scraped that edge away, the interior core was dry as a bone and when you put water on it, it just beaded up as it should. So, it's certainly as water proof as anyone not living in New Orleans would ever need. We replaced the water damaged drywall with DensShield, and now she can tolerate a 10 inch deep flood in her basement without incurring any damage to the walls.
So, I don't know why you want to set ceramic tiling on your walls, and I think you're just creating a liability by doing so. But, if you're looking for a waterproof alternative to drywall, then look no further than DensShield. It comes in the same size as drywall, and is as easy to install as drywall, and it can be easily skim coated with joint compound and thereby made to look exactly the same as a drywall wall.
So far as the ceiling goes...
I'd just take a razor blade (actually, an Olfa knife with the break away blades) and a piece of sheet metal. Hold the sheet metal flat against the ceiling in the corner and use the razor knife to cut through the paint, joint compound, paper corner bead and surface drywall paper 1/64th of an inch below the ceiling without harming the ceiling at all. Then remove the drywall on the wall right up to the ceiling as you can be sure that anything that tears off will only tear up to that cut line and no further. Then you can scrape that 1/64 of an inch off with a paint scraper and plaster over it.
Maybe I'm misunderstanding the issue here. Could you please explain exactly why you're concerned about the corner at the ceiling where drywall meets drywall? I just don't understand why you would be apprehensive about it.
If you're still concerned about it, then I'd go to 6 inches below the ceiling, and drywall screw a 1X4 to the cut edge of the drywall between all studs so that 1/2 the width of the 1X4 is sticking out below the drywall. Then when you put up your tile backer, screw it to the studs, but ALSO screw it to that 1X4 between the studs. That strengthens the joint between the two wall panels and insures you don't get "hairline cracks" in the glazed surface of the tiles that straddle that joint because of relative movement between the two panels.
(That'll never be a problem because the area at or above the shower head never gets wet enough to cause even ordinary drywall that's merely been painted to deteriorate. That's why you don't have any problem with the drywall shower ceiling you have now.)
Then just paint over everything you're going to be tiling in the wet areas with RedGard, and proceed with the tiling.
If you haven't tiled walls before, you might want to read my posts in the "Shower Retile Underlayment Advice" thread below this one.