Minimal transition between tile and drywall

I just took down some tiled drywall and want to replace it with only drywall. The remaining remnant of tiled wall is just past the stand-in shower. I plan on cutting tile and finishing the vertical strip just under the remaining tiles. My challenge is meeting up the new drywall with the existing tile so that it is flush.
My questions are:
1. I’ve attached ¼” luan to the framing studs to bring the new drywall out to (hopefully) meet flush the tiled wall. Is this a good approach?
2. I plan on running one piece of drywall vertically because it fits with the fewest seams. Can I use something like "J Bead" to make the rough edge of the drywall look more finished? And, would I fill the vertical void between tile and drywall with caulk?
3. I left this bendable substance on the shower stall flange. What is it and should I use it again before placing the tile? In my demo, I’m assuming that the old tile drywall was installed next to the flange, but not onto it? Correct?
4. What should I use to adhere the new tiles?

Thanks for any and all help!

 

Understand that you furred out the studs to hide the thickness of the shower itself. Usually, a cement board is attached, or drywall as you are outside the wet area and then the tile is adhered to that. I think you want to simply finish this with a bullnose tile and take the tile then to the floor and leave the rest of the wall drywall and painted, is this correct? You would use a thinset from a bag and not from a premixed variety.

Not sure what the bendable stuff is that you refer to, may be caulking that was squeezed in behind the tile.

 

1). No, if you have 1/2" behind the tile, you don't want a shim, and you don't want the drywall flush with the surface of the tile. Apply 1/2" drywall as you normally would so that the drywall is even with the back of the tile.

2). No I think J or tear away L-bead would just look bad. You should just flat tape it with durabond.

3). Probably caulk. Remove it. Drywall up to the flange, then prefill with durabond and fiber tape with durabond before tile.

4). Like czizzi says, use thinset and apply your cut tiles to cover the tub flange, then maybe add another row of a bullnose tile as edging all the way top to bottom.