Jane, we are considering doing exactly the same set-up for exactly the same reasons! The only available spot (!) for our MW is next to the fridge. We also don't want to sacrifice counterspace with the built-in version Advantium, and we are wary of flirting with warranty problems by mounting it undercounter, even though other posters have here. So the OTC model it is!

I bet the cabinets are built in place. Moving/removing might destroy them. You may end up saving the doors and having new boxes made. Then they can be any height you want. The sink will be a problem if you don't replace/raise the window, too. You need that sink for the feel of the kitchen if you want to keep the look of the cabs. It will probably cost the same to just buy new cabinets. But that doesn't solve the sink problem in the same foot print. And if you change the foot print then you've opened a new can of worms. Changing the window size would probably be the best thing to do.

Heatheron40, very nice. I asked a question about doing a tile countertop in our guest cabin recently as I feel like the look would complement the cabin aesthetic. Also I’m dying to learn to tile and thought it would be a fun place to start as it’s not an everyday space and I could take my time. Most of the responses were against. Basically stating the grout would make me crazy. The guy at the said what you’re saying I think, he said that modern grouts are more resistant to staining and such, and also to go with a tinted grout of some sort. I love your use of pattern to give it interest and intention!

What a mistake! Hopefully you have posted on the Building a House forum for input. I wouldn't do either of your proposed options if this happened to me. I know these options are more work, but I'd prefer to remove the soffit and change the door opening into the kitchen, building the soffit over that opening. This creates a deeper hall. To me you keep the dramatic ceiling that you are apparently going after and it's much less of an interruption to the eye. I guessed at your ceiling height; I know it's not correct but this gives a visual. I would also do a fridge surround and cabinets on top of your baking station. Or, if you don't mind the lowered ceiling there, I'd go all the way across with a deeper soffit to match the wall to the left of the fridge. This give you more balance and storage. I would have attempted to go as high as the soffit with cabinetry, but I don't know your height there. Hopefully, this bump gets you some more input.