I have a bath/shower combination, which is setback in the bathroom. Should I tile the ceiling over it?

Depends - if the ceiling is high enough so that water will never splash on it and there is plenty of ventilation above the shower door to make sure that any condensation can easily dry then it's not really necessary. But if the ceiling is low and/or the area not well ventilated then you should tile. If you decide to tile the ceiling be sure to use green board rather than regular sheetrock, or better yet cement board.