I would do a glass splash back [ this can be painted in your color choice to suit the decor ] - taking from the bench top up to the bottom of the range-hood on the wall of the stove. The window is beautiful and I would give anything to have them in my kitchen. I would probably paint OR stain and apply marine grade vanish to the would so that any moisture would not be able to ruin the wood. I would also put herbs or flowers there. Could it be made into a servery for outside maybe ???

Any pictures of kitchen, design?

Thanks everyone for the warnings. Honestly I had not thought that could be possible so just in case I'll gear up with a mask to avoid inhaling any of it. I will still need to remove it, but from what I read the problem with asbestos is if you sand it and make it into breathable particles, so ripping it out should be ok. I've looked up in youtubr and there seems to be a tool called mastic remover that you can put on your floor sander and it would scratch the surface removing any of that stuff.

I recently saw this episode of Ask This Old House where they demonstrated painting tiles - especially as a solution to get one through till an entire redo is possible. http://www.thisoldhouse.com/toh/tv/ask-toh/video/0,,20902001,00.html Looks like you are doing a great job!