It may work for your purpose, but I think it's not a smart thing to do. That area is subject to flex, vibration, temperature swings and condensation. What's the point to cover it? Why not tile to within 1/8" of the window and then caulk it?
Windows in a wet area are always a problem eventually. How are you gonna waterproof that area? Remember neither tile or grout will make it waterproof.
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Thanks for the info. The window is already set in place and is a little too deep and can't be shifted in any more since it lines up with the siding and aluminum wrap on the outside. The Hardibacker lifts the wall tile too far off so we were considering having it overhang the vinyl and then caulk the inner edge where the tile finishes and the vinyl continues on.
The window is a crank type and is set up high so it gets the occasional spray but is not a direct shot of water since the bottom is up at over 5 feet.
Don't have a ton of options since the window is set in, but not enough to fit something grand within.