1/8" looks fine; I understand that less than 1/8" is not practical unless you have high quality (rectified?) tile, and 1/4" looks very 1980s to me; light gray if you want to play up the cool colors, tan if you like warm tones better; can't help on the technical questions. Here's mine with 1/8" and light gray grout:

For regular 3"x6" subways, 1/8" grout lines seem kind of big. I guess it depends on the "look" you are aiming for. If you search on "subway" and "grout" on this forum, you will no doubt find lots of pictures, this comes up often. You might also search on the bathrooms forum, since subways are used there a lot also.

Personally I prefer very small grout lines, and if you use regular Daltile or AmericanOlean subways, they have built-in spacers on the edges of the tile that are less than 1/16". With tight spacing like that, I think it would be tough to use a sanded grout.

I suspect that you will need cement board backer rather than drywall, but I defer to the tile experts here on that one (and everything, actually !).

I used Laticrete Silver Shadow with my AmericanOlean designer white subways in the bathroom. It looks fine.

I used Daltile's subway and have 1/16th in grout lines. For anything 1/8 inch or less you use unsanded grout, or thats what I have been told by all the tile people I have talked with.

From what I've learned from Bill Vincent, sanded grout is used for larger grout lines and unsanded for smaller ones or very delicate tile.
You might also consider epoxy grout for your kitchen, since it's indestructible, mold-resistant, and doesn't need sealing, although it costs a bit more and your tiler might upcharge a little for the installation. I'm about to tile mine myself and plan on using the same epoxy grout (Laticrete's Spectralock) that I used in the bathroom, which I'm loving for its smoothness and consistent color.

Most folks seem to go with 1/16th for a 3x6 subway tile, although some use 1/8th (bluekitobsessed, yours actually look like 1/16th to me?). If you take a stroll through the John Bridge tile forum, you'll see all kinds of examples of the different spacings in grouted tile. Here's one at 1/8th.

From what I have read by the experts, it's OK to use your existing kitchen drywall for a backsplash. As long as it's in decent condition, you don't have to replace it with hardibacker, which is meant for places like showers that get lots of serious water exposure.

I'm sure Bill V will wander by soon and give you the real skinny from the pro's perspective.

Enjoy!

Here is a link that might be useful: John Bridge's tile forum

I also like the smaller grout lines with any backsplash tile job. Just my preference though. We used unsanded for our 1/16" grout lines. We did not put up backer board; just kept the regular drywall. It's a small space that won't have water running down it like a shower area does.

Thank you! Thank you! Thank you! It is so nice to wake up to all those beautiful subway pictures - they are all awesome! The information you each gave answered all my questions, and I knew I could depend on this forum to help! I really feel that drywall will be okay to use and that I want the 1/16th spacers, but not with the sanded grout that my contractor was going to use. As for the grout color, I am strongly leaning towards gray for now because I thought it went best with the UbaTuba granite, painted white cabinets, and SS appliances. Although my kitchen is painted Golden Gate (goldish tan), so that leans me towards the tan grout... decisions, decisions, decisions... lol

I also noticed that Daltile is very popular, so it must be a good tile. I was looking at Stellar, but now may change that to Dal... I will check that out today.

Hopefully soon I will be posting pictures with my kitchen finally complete with the subway tile backsplash!

Again, thank you for the great advice! : )

When I was undecisive about what color grout to use, I cut out thin strips from the samples and taped them to the tiles. This helped with my decision. Sometimes, though, the paper samples can be a tad bit off in color.

Another option is to make a demo board if you have left over tiles (even some with broken ends). You can grout sections with both colors you like and see what it looks like dry.