The mortar bed and plywood are sitting on concrete? I'd say it depends on how robust the mortar layer is. If it's easy to remove, I'd pull it out and re-SLC the whole region, then thinset down a decoupling membrane before tile. You can get decoupling membrane with integrated heating wire if you want to get fancy. I've used ditra-HEAT a couple times and it was pretty idiot (me)-proof. You'll want unmodified thinset or their special stuff.
You could also probably pull out just the plywood and makeup that section to level with fresh mortar. If the existing mortar isn't falling apart, I don't think you need to worry about cracks.
Another consideration as you decide is what the floor will transition to - that may help you decide on what layers you'll want in the bathroom
Also, what kind of bitch government needs to tell people how to feel