Savia you said in your question that the wall around one of the fausets was turning to mush. That leads me to believe that they have used green board as the backing. Green board is just drywall with a water resistant coating. this is only water resistant and not water-proof. so yes you need to take out the old tile and the wall and replace the green board with Dura Rock. Durarock comes in sheets like drywall except it is made of a mesh coated concrete. once you have the dura rock installed then you can install the tile over that. Well happy tileing and have a great day.