The thing is, if you think you need to not do the job, it's clearly something that you don't fancy doing, but imagine a firm that can do everything quoting for it, they wouldn't even consider loosing the job, they'd just start naming materials and labour hours etc etc etc. On the other end of the scale, Uncle Bobs tile cleaning services would over-price a job where they were asked to just even replace a tile, if it's something he fears doing. So it's just down to what you're prepared to do, and for what money.
That job sounds like a money maker to me though, win win too, you could do the whole thing, down lighters that are motion sensitive, walk-in shower area with a nice glass panel you walk around, some really nice marble tiles wall and floors, new loo etc etc, and as you'd be doing the whole job, you'd find it's really easy to plan it all in. you'd be able to price right, get good gear, make the customer happy, and actually, have an easy job tiling it all than you would an shitty old wall.
Just rip it all out, re-board it all, tile, new ware.