We have a similar home in a sydney beach suburb. We are in a different position where we have bought ours as a downsized but are just about to restore the old 50s beauty to its former self. We have quotes of around $400000 to gut and change the floor plan which includes 2 bathrooms and a new kitchen and also add internal stairs to the garage and a large deck off the back, lift some ceilings and replace gutters, eaves ect ect ect. Attached are my inspiration boards and what the house looks like now, hopefully in about 4 months I can update you.

We did a heavy textured tile (each tile also has a different imprint design) in the same size but I went with white grout not to bring out the irregular grout lines too much. I feel it gives texture but not over the top! the pic u posted looks badly laid and they are different size tiles. There is great textured tile at Amber tile or colour tile (I'm in Sydney) otherwise I think like your husband suggests and go with the standard subway (but change grout to black for that industrial feel) otherwise how do you feel about a beveled subway? That would of been my next choice!

We would recommend two choices - matching your wall colour with a tone of the slate and your roof or you could have the slate removed as well a plasterer to fix and repair the patches then you are not limited by colour selection to match in the slate. A possible use for the slate if you choose to leave it there would be a floating seat (painted black like your roof) just below the slate - use the slate as a seat back or continue the slate up and create an outdoor BBQ area with the slate as a splash back for the BBQ. You could also install a floating bench (but check the weight bearing possiblities of the wall). A great landscape designer &/or builder could help you with a concept plan - good luck! The yard looks like a great space - BBD

decking has different structural and legal requirements to an enclosed room depending on how you want to use the space...a covered pergola and screen walls could be added to a deck to create a sheltered outdoor entertaining area but would not be suitable to use as an enclosed room suitable to use like a lounge...what do you want to use the space for?.