MSE (Mechanically Stabilized Earth) does go back a long way into history. The thing about it that isn't immediately apparent is that the walls have little to nothing to do with it in regards to large scale builds. They are merely a facing so it doesn't look bad. And indeed on the large scale if the walls were the only thing holding earth back they absolutely would break sooner or later.
What's going on here is that earth is firstly compacted by tamping. Then every x amount of feet in height A layer of fabric or netting is laid down. After which more earth is compacted on top of it. This serves to reinforce earth in a similar manner to how rebar reinforces concrete.
Another part of it is that large section of MSE also have very good drainage. They usually sit on top of and gravel/sand layer. And are top graded towards where that layer is near the surface. This channels water causing it to mostly avoid dissipating through the structure and keeping it relatively dry. Which prevents the earth from inflating by taking on volume. And keeps the reinforcement material from deteriorating as quickly.
Now actually walling does play a part as well. Underneath what you see (or integral to what you see on the surface) is an interlocking layer of wall. But the wall itself is almost never just regular wall. There is something engineered that is invisible to you going on there.
Here is a diagram for reference:
So having back-filled wall in the game wouldn't actually be all that realistic. because that's not the whole of how it actually works. But the game does have the preexisting assets to make to make MSE terraforming a part of the system.
What we would need are blocks of earth on can build on top of level tiles. Basically an object that you can build permanent objects on top of. This would probably be easier than to change how terraforming works (to make new object with a few rule exceptions).
The way it could work is if you level a tile then under masonry you construct an MSE block. It could require dirt, rock, and linen cloth. There could be a whole famiily of these objects (non-movable, built objects that can have other non-moveable built object erected on top of them).