advice needed... water/wall problem above fiberglass shower stall

I have a one piece fiberglass shower in my master bath. The fiberglass stall is only 6 feet tall and the remaining two feet to the ceiling is painted drywall. Not surprising to me, the drywall is crumbling where it meets the fiberglass due to the moisture/steam/splashes from the shower. A small bead of caulk seems to be ineffective. What should I do? Is there a way the drywall and fiberglass can peacefully co-exist? (More caulk?) Should I tile the area from the fiberglass to the ceiling? (I have a tile floor that I hope I could match). If I do this... how to do it? Cut away all the drywall, install Durock directly to studs, tile on top of that? Would this be a hard job? Any advice?
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You need a vent in the bathroom and a window that can open.

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your drywall is not water board

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If the drywall had been properly primed and painted with a good Oil based or bathroom paint, the crumbling might not have happened.
After repairing (gouge out bad gypsum and patch with plaster or some other patch that won't soften when rewetted like drywall mud will) prime and paint as I suggested.
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