Waterline tile is a heck of a lot cleaner than pebbletec. Pebble finishes all the way up to the coping were popular not too long ago until people realized just how bad the "bathtub ring" looks and how hard it is to clean pebble. You don't see many new builds opting for that look anymore.
I'm no expert but if you are going to do the wall with tile, you'll need to get rid of all that pebbletec and clean it back to the gunite. You'll then want to apply a water-tight sealant to the gunite. Merlex Super-Blockade is used by our resident pool building expert. Then you'll apply the tile and have all the detail work finished
You'll want to be very careful about how you remove the pebbletec finish so that it's as close to the new tile as possible. Pebble patches never match the original color of the plaster and so you will definitely see where the plaster is patched. If you can square it up to the tiling really well, perhaps by using a angle grinder to cut a straight line, you may be able to get away with just the tile grout. Epoxy grouts are a pain in the rear to work with but will offer the least amount of water penetration. Standard pool tile grout will work well too and you can always add a sealant to it after it dries but that will be temporary and need regular reapplication.
I think you'll have a hard time finding a pool contractor this time of year to tackle such a small refurb job so you might consider waiting until the fall when their book work depletes a little and their more willing to entertain smaller jobs.
I'll ping our pool builder expert, he's likely to have many more insights....