There are a couple of things you can do.
1) They sell these glue on dividers that you can mount on the ledge of the tub. Think the hypotenuse of a triangle. This blocks water from exiting the shower enclosure. They are cheap maybe $15. Go on with glue and caulked for appearance.
2) You can tile but you'll have to replace the drywall with cement backer board. The drywall won't hold up and grout is porous.
3) You can glue up some synthetic paneling. You'll have to ensure a good fit and caulk with 100% silicon. It won't look good but it will work.