Agree strongly with Mike's suggestion. Use cement board. Your home is another victim of poor non-code construction. Water can seep through tile or other material at numerous points, but most commonly at corners or the baseline where tile meets tub. Routinely clean and reseal the corner joints and tub to wall joints with a good FLEXIBLE tub sealer. Personal painful experience found moisture expands drywall, easily cracks good ceramic tile and makes for a royal mess. Unless you simply Unless you can simply not afford better avoid the thin plastic wall kits. Enhance the value of your home. There are some interesitng plastic panels if you don't like the though of tile. Since someone used drywall instead of cement board they may also have mounted your faucets in such a way that they will be difficult to repair with damaging new wall materials. Check facucets while you are putting in the concrete board.