Water – Should this retaining wall have drainage

Wood exposed to earth, or even gravel, as you discovered, is a compromise at best. You can hedge your bet by using treated wood. Use wood with the maximum amount of preservative. "Outdoor wood" is not enough, the preservative levels must be at least adequate for ground contact. Preferably wood treated for foundation service should be used. Doing something to ensure any water that does contact the wood can easily drain away is also important, as well as trying to prevent water contact in the first place.

9" of soil does not impart much of a lateral load, so almost any retaining structure will suffice. Still, it would be better to not involve the fence if possible IMO. How far back from the existing structure would depend on what you end up doing to retain the extra earth. You could extend the existing structure, which would obviously have 0 offset. At the other extreme, relying on gravity to retain the earth, such as placing a row of large stones, you would want to see a minimum 45 degree slope between the existing wall and the tops of the new structure.

By using an impervious retaining material like stone or concrete blocks, you can backfill with plain soil, no gravel is required for minimal height walls. Taller structures often backfill with stones to prevent hydrostatic pressure from pushing on the wall. When back filling against wood, do everything reasonably possible to prevent water from contacting the wood, even if it is treated.

I built a retaining wall in a situation very similar to what you described. In my case the wall drops approximately 12" over 40 feet. It has 3 courses of 6" Keystone wall blocks. The first course is mostly buried and the wall is about 12" high over most of it's length. I also put about 4" - 5" inches of drain rock behind it with a landscape fabric barrier.

This was 15 years ago and it seems to be holding up just fine. I would hope that the 4" blocks you want to use will be ok. However, I've worked with that size some doing garden walls and they are definitely less stable than the bigger blocks.

One other consideration here is aesthetics. Make sure looking at a retaining wall that isn't level doesn't bug you! Sometimes I look at mine and wish I had installed it level and stepped it down instead.

In the area where I live we have an assortment of gravity block retaining walls and the ones that follow the slope usually don't look as good in my opinion.

Here is a photo for reference: