If you're going to use a shower arm diverter, correct, you don't need another diverter built in to your supply valve. Just a diverter on the end of your shower arm.

If you want to keep the TBIII and use it to its potential, then just pick up a combo wall outlet/bracket for the handheld.

Plumb one of the TBIII ports to the wall outlet/bracket, here's a Grohe one for example:

That will allow you to position the handheld near your shower arm or position it on another wall.

An alternative would be to have a wall outlet separate from the handheld holder bracket. You could use the above combo outlet/bracket on the wall around knee level. The handheld could be put in that bracket when shaving legs for example, or washing the dogs or showering toddlers.

Add a second bracket (just bracket, not a combo outlet/bracket) up higher on the wall for standard showering.

Regardless, match the bracket to the handheld (same manufacturer) so you know they will be compatible.

awww man. thanks mongo for the "bad" news...it was very helpful. alternatively, can i use a slide bar? how do people decide whether to use a slide bar over a bracket?

Either or is fine, I didn't mention the slide bar since you wanted the head fixed up high to begin with.

But yes, you can use a slide bar.

You can usually get everything as a kit and shave a few dollars off the a la cart price; the handheld, hose, outlet and slidebar. I recommend a hose length long enough to reach the opposite corner of the shower for rinsing the shower down, etc.