In every example I have seen, the tile is not even with the drywall. They are edged with bullnose.

If it really, really drives you crazy to have a non-flush wall you can do one of two things:

1 - Tile all the way to the ceiling
2 - Use thicker drywall above the tiles

>They are edged with bullnose.

or with Schluter edging where that's not available or not desired for aesthetic reasons.

Tile always sticks out further than drywall. You caulk the edge tile to cover up the thinset.

Making the tile and wall surfaces flush, (in the same plane), is commonly done. You just have to fur out the walls, which indeed, does make the room a little smaller but you'll probably not notice the change.

I did it in my bath remodel:

http://www.billbblog.com/Diy/34/Tile-Shower#Shower to Room Transition