Given that this probably happens a lot it should be fine with appropriate extraction (and don't scrimp on the extraction fans), but I agree that it's preferable to have access to fresh air whenever possible.

So it comes down to the compromise on the rest of the space and what your requirements and priorities are. If you are going to use that bathroom to shower in every day then it's different to it getting occasional use, for example.

A different option would be to make the old kitchen into new utility and bathroom - change the kitchen window for an exterior door perhaps? Then just extend out from the dining room, but perhaps extend a bit farther than planned (to create more internal space). It'll make the back of the dining room darker, but still useful for kitchen (could get a really nice walk-in pantry in that area, where you don't need natural light). And the open plan space will be longer and narrower, with less views to garden. But would that work better for you?? Also might be easier (and therefore cheaper/quicker) as would be less walls to take down??

Are you just worried about damp because you are used to a bathroom window?. i think you forget that most new apartments have no bathroom windows.

you could add a small window that is high enough so no one can see inside the bathroom, if you are worried that an extraction fan will not give enough release for humidity