If you would like to send us your file, we would be happy to look at it and give you some more specific suggestions. I use the back side of the retaining wall as a boundry. It takes a little planning but the results are worth it. Thank you everyone for all your suggestions. We have not heard back from Scott regarding our questions, so perhaps he has solved his retaining wall problem.
Uniform scale is a proportionate transformation.
Your suggestion seems to work the best so far. I actually combine your approach with Jane's, separating out the areas around the retaining walls as separate terrain models. Unfortunately, even when I keep the mesh size the same, I get an 'edge' - that is, the cut line is visible in the rendering because the edges don't match up exactly. This requires that I go through point by point to get the edges to match. It seems that Z generates a slightly different topo model depending upon where the edges of the site are.