Oh, my goodness, I thought I was the only one with a bathroom like this! Thanks for posting and comments everybody! This is going at the TOP of the links!

test for lead based paint before you do any scrapping.

You could probably clean that tub with barkeepers friend and a magic eraser.

I suspect a mold/mildew problem is the issue "behind" the walls & ceiing. That is a health threat, so make sure it is properly treated before you do anything else. No good to cover it up with new construction - it will come back and ruin the redo.

sorry, but I think when you have mold and wall rot that anything you do or money you spend short of a complete rehab will be a wasted. Is this the only bathroom in your home? Do you own or rent? Hanging out with black mold cannot be good for you, so if you rent, I would def get the landlord after that problem.

Unfortunately, this is not an easy fix. Structural issues have to be dealt with first. I would bring these pics to your local hardware store or home center for help. As you have indicated, you have to figure out what the rotten walls are made of in order to fix them. I'd like to see a plan starting with a three ring binder. Get loose leaf paper for it as well as plastic top loading sheet protectors. Categories may include plan, budget, timeline, design ideas, vendors, etc. Since you are dealing with a 1929 home, I would respect the style of the home for this room as well. As I'm sure you will imagine, putting modern fixtures in a 1929 home is probably not a good idea, not only for resale but also it will probably not look compatible. Your local historical society or center may be helpful with details about your house, including materials, colors, etc. Please keep us up to date with your process.