I say go for it! As long as you're thinking of going to all the trouble of a rock retaining wall, adding your rotting firewood is minimal additional effort.
Some people see downed trees or rotting wood and think: "water!" I see them and think: "soil!" Both thoughts are appropriate for your situation, so you can't lose. Be aware that your rocks are going to be a heat sink in the sun, so put the emphasis on heat-loving plants (peppers, tomatoes, squash, melon - if you have the space) and use plenty of mulch to limit evaporation from the soil surface. Or build your retaining wall from timbers (salvaged, of course), which won't heat things up as much. Consider harvesting water from your downspouts to make it through the dry period. Seems you're getting plenty of moisture this spring!
For your back yard raised beds, try planting your more shade-tolerant veggies back there: almost all your greens will love it, and root crops and beans will put up with it. Try adding a bunch of tap-rooted support plants (comfrey, mullein, daikon) to break up the clay pan under the beds and create root channels for your harvestable crops. These plants will also add biomass for soil improvement, mulch and compost. Plus you can use parts of each for medicinal purposes or food. Mulching everywhere you eventually plan to plant with lots of wood chips and planting daikon and other big-root-system herbs will open up the soil and give the soil life a chance to come to your assistance. Worms and bugs will only show up for work if they are protected from sunshine and heat, and they'll really appreciate plants that open things up a bit for them.
Subject: Hugel retaining wall?
I live in an urban area with limited land - 9000sf. I'm fortunate to have some lovely large oaks in my backyard that keep things shady and cooler in our hot humid summers. Down side is very little sun for growing anything. In the past, we built some raised beds in the sunniest area we could find in the back, but even though we added manure and other things to fix the clay based soil, there was never much succeess. The sunniest part of my yard is actually in front of the front yard where what is currently a lawn slopes down to a sidewalk. I'd say the drop is about 2.5 feet over a 4 foot run. So I've been thinking about getting some rocks and build up a bit of a retaining wall and fill in with good soil and compost to grow some veggies.
But all this Hugel chat has me wondering if I would be better off digging down a bit and loading in the remains or a pile of rotting firewood in my back yard plus maybe some smaller brush, then building up with the new, better soil on top of that. I don't really want to make it a mound, but do you think this approach might give me better results than just creating a filled in bed behind the wall? We are in the Mid Atlantic and seem to have very dry summers lately so I'm hoping the hugel thing would help keep some of the moisture in place as well.
It isn't a huge area, but I would certainly like to start growing some veggies that actually thrive.