This stuff is made specifically to address your problem .. .. ..

http://www.latexite.com/pr-crkstix.html



I was thinking of sealing the gap (the top section that is) before
laying the tiles (now or never...).
Cement is the obvious choice, but I've heard of this thing called
"temperature" and "expansion". That's what I get for watching all
those DIY shows. Ignorance is bliss......

So, I thought about cutting a strip of thin board (1/8"), place this
in the gap against the wall, and then fill the gap with cement,
effectively using the board as a form. That should leave enough room
for expansion.
What material would work best? Vinyl concrete patcher?