Terrazzo. You may be able to find full one at a demo yard.

They are probably concerned that silicon becomes mouldy. If you are happy to resilicone every 8-10 years it shouldn't be a problem. My main concern would be the very slippery surface you would be creating which may be a safety problem.

Walk-in-showers are great for large bathrooms, but are problematic for small bathrooms. Even more so with a timber floor which does not comply with the regulations for waterproofness for wet areas. There are regulations in place that your waterproofing will need to comply with, as set out by the Building Code of Australia and Australian Standards (AS 3740-1994). You will need to do some research and speak to a professional as you are heading for disaster with the combination of a timber bathroom floor, a small bathroom, a walk-in shower, no waterproof membrane to protect the floor and no understanding of the legal requirements. Houses of the 1920's traditionally had tiled floors so I would be looking at one of my suppliers such as the Olde English Tile Company to help you source somethiing that is period appropriate and legal instead of timber floors. Olde English Tiles Best of luck, Dr Retro of Dr Retro House Calls

I think flush will look more intentional, inset by such a small margin may look like you didn’t quite get the measurements right. Good luck with your reno.