Wood – Do I need to do any maintenance for a wood retaining wall

Try not to go too cheap - if you do this right you may save a lot on not having to sort out dehumidification off-grid, as I assume this is the same building, and if you fix the walls getting wet you won't need that, or at least not nearly as much of it. What dehumidification options don't require a lot of electricity?

Unless you have a great desire to preserve the exterior look, I'd strongly consider wrapping another layer around this - whether it's "plastering" "stuccoing" "rendering" "Exterior Insulation and Finish System" (high-tech stucco with more insulation) or just framing up a new wooden wall level with or just past the ends of the interlocking wall logs. If going with wood framing, be sure place an air barrier ("housewrap") below the new siding layer that will block liquid water but permit vapor to pass.

Look up "Larsen truss" for one relatively low-cost and DIY friendly method of framing a new insulation cavity and non-structural (not holding the roof up) wall onto an existing structural wall.

Or you could just shingle it - traditional (and durable/effective, thus the tradition) for seaside houses around here, but you may have difficulty finding cedar shingles in your local area...is there such a thing as wall tile like the roofing tiles a that are more common there than here? Or perhaps you get shiploads of cedar shingles from Canada?

Are you talking about a retaining wall above the house's ground level, or below?

If above, you will need to provide enough clearance for any emergency exits but other than that I can't think of any limit. As for being built into the house, you could think of a walk-out basement as having a retaining wall on the uphill (non-walkout) side.

If you are talking about a wall below the house, you need to make sure you don't undermine the house's foundation. The distance you need to be away depends partly on the soil so if you are wanting to get close to the house (say, closer than 2 or 3 times the wall height) you would definitely want to talk to an engineer.