replacing shower faucets and head

I'm remodeling main bathroom from house build in early 70's. Current set up is a single faucet with diverter, etc. New one is the same. I finally got the faucet handle pried off - there's absolutely no room to work - it appears the plumbing was put in for the bathtub/shower and then the walls went up. ! 1/4" thick back to the studs. The wall is plywood against stud, then sheetrock, then a thin backer board of about 1/4".

So it appears, I'm going to need to cut the wall. I'm guessing just to the outside of the two closest studs I can find in a vertical cut from spout to shower head? Then I guess I'll have to layer back out to be flush with current wall. I am going to tile the whole thing when I'm done, but was hoping I wouldn't have to rip wall or part of wall out.

There is no back access except to the height of the spout. I can't get up to the faucet connection from the back side, or the shower head either.

Does this sound right, or any other ideas? I'd post pics, but don't have them out on the web.
Thanks in advance.

Well, normally, neither the ply nor the drywall should be in a tiled shower wall sandwich, so I wouldn't fee bad about tearing some of it out! You might find it in perfect shape, but you may also find that the drywall and ply is all moldy, especially down near the bottom.

A more typical wall would be vapor barrier on the studs lapped over the tiling flange of the tub, 1/2" cbu, then tile. There are some neat newer materials that are easier to install - Kerdiboard and Wediboard come to mind. These go directly on the studs and you tile to them directly.