I'd recommend venting out the gable. Run a rigid vent from the gable wall to a point near your install, and use a 2' piece of flex duct to connect the fan to the rigid vent. The flex duct makes the bends easy (don't kink it) and allows the fan to be repaired from below in the future. For that length, I don't think you need to worry.
As pointed out by others, luminaires above or near a tub/shower must be "steam-proof" (rated for damp locations). This means the fixture will be sealed in some way, to prevent moisture from entering the housing and causing damage and/or an unsafe environment.
NEC 2008
410.10 Luminaires in Specific Locations.
(D) Bathtub and Shower Areas. No parts of cord-connected luminaires, chain-, cable-, or cord-suspended luminaires, lighting
track, pendants, or ceiling-suspended (paddle) fans shall be located
within a zone measured 900 mm (3 ft) horizontally and 2.5 m (8 ft)
vertically from the top of the bathtub rim or shower stall threshold.
This zone is all encompassing and includes the space directly over the
tub or shower stall. Luminaires located within the actual outside
dimension of the bathtub or shower to a height of 2.5 m (8 ft)
vertically from the top of the bathtub rim or shower threshold shall
be marked for damp locations, or marked for wet locations where
subject to shower spray.
Corrosion
The major concern here would be corrosion inside the fixture, which can lead to dangerous heating, arcing, shorting, etc.
Heat
Corrosion on contacts increases the resistance of the circuit, which can lead to excess heat, which in turn can lead to increased resistance. Given the right circumstances, wires/contacts can be heated to the point of ignition.
Arcing and Shorting
In some fixtures, contacts can be in very close quarters with each other. If corrosion builds up causing the gap between contacts to reduce enough, arcing can become a problem. Similarly, if the gap closes completely, a short can be created.
PITA
Corrosion in fixture can simply lead to a frustrating situation. If the screw base of a bulb becomes corroded enough, the bulb could become difficult or impossible to remove. This could lead to the fixture needing replacement, or at least an annoying bulb change experience.
Ground Faults
As we all know, water conducts electricity (in most cases). Because of this a deadly ground fault situation can be created, if luminairs are allowed to get excessively damp or wet. If enough moisture enters the fixture to cause dripping, a solid stream of conductive water could bring electricity within reach of a well grounded individual. In this scenario, a simple touch of the light could be deadly.
Best Answer
I think you would want the shower ceiling to be the same height as the rest of the bathroom especially with 8 ft ceilings. An average height man with raised arms would touch a 7 ft ceiling. Who wants that? Everybody wants higher ceilings rather than lower.
The only possible benefits of a 7 ft ceiling might be to better confine water vapor and mist to the inside the shower enclosure during showering and to reduce the amount of tiling if the tiling goes to the ceiling, but I don't think this is enough benefit to balance the cramped feeling of a lowered ceiling in the shower.