Great question — answering as the UphillTech team:
1) No, definitely not the best solution. I think the best solution would be tearing out the tiles that surround the niche and re-doing it. 2) I am not familiar with wall tile, but with floor tile, you don't install new tile over old tile (typically) because of concerns of cracking if there's any movement in the subfloor. With your situation, I think the major concern is waterproofedness -- I'd be concerned around the edges of the niche whether there's any break in your cementboard/vapor barrier. Water might be able to get around the tiles that make up the 'walls' (in the Z-plane) of the niche, since grout by itself is not waterproof and may let water through.
Full answer by Bzrs: https://diy.stackexchange.com/a/63304 (CC BY-SA 3.0).
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