Any tips on fixing a difficult wall for tiling?
If this were my wall: I'd pay the $30 to have an engineer remove the towel rail and fit service valves to the pipework. Then you can take it off, replace it, or what-have-you whenever you want without worrying about the upstairs neighbour. Mention to the plumber that you'll be re-plastering and re-tiling so the service valve is properly proud of the wall.

Then, with the towel rail off, get someone in to plaster it. (Don't try plastering yourself unless you do it for a living, it's much harder than the fellow you'll get in will make it look.)

Then tile away. A smaller tile means you can generally get away with really quite big imperfections, a wall that's a couple of inches off true at the top should be fine. (See here for more on that.)