Should backer board be installed all the way to the ceiling around a shower?
I don't believe it's necessary to run the concrete/hardiboard all the way to the top on a remodel application.  Your point about not messing up the ceiling is a good one that people often run in to.

I assume that the drywall that is existing is greenboard or blueboard (i.e. wet area approved)?  You have to think "if it's lasted in bathroom this long..."  I ask because "wet area" rated drywall is better at dealing with mold etc and if it's a moderately modern home then it's likely that code required it's use.  The only other issue (especially that high on the wall) will be if the hardiboard and existing drywall are flush with each other.  Even if they're a tiny bit off the mastic may help make up the difference. If you tape the joint between the two use a non-paper tape (they make fiberglass).

As to bonding tile to drywall?  It's done all the time, especially in kitchens as backsplashs etc. Just make sure you get a good quality tile adhesive.  I prefer portland based w/ a modifier such as acrylic.  I think it grabs tile much better than the cheaper white thinsets.  You may have to mix it from dry but it's worth it.

Best of luck!  

Port