While ancient walls have been built like yours and still stand, Marcinde's method makes it easier to guarantee that you won't have problems. Your wall looks like it has decent batter, but it cannot be determined from the picture if it's consistent throughout. I think this is one of the most important components of dry-stack retaining wall stability. Keeping batter sufficient throughout will help wall longevity. With greater batter comes greater stability and, personally, I like the look of it as long as it's uniform. You could easily create a wooden triangle with a level attached to gauge the batter uniformly.

Well first off, you're going to need to level out the ground somehow if you want to put a solid foundation of stone. Use a pick axe or something or hire someone stronger to dig into the roots. Then get large stones and place them level on the ground. Otherwise it won't work (unless you just want a one course wall). Here is a source for stone: http://www.lakeviewstone.com/products.htm

Ironically, you're not a newbie compared to most people who take on this sort of project. You also fall into the category of people who will probably be most frustrated by having contracters, as you probably have pretty specific expectations about how they should do it. I agree that the site prep is what you sound most leery of, and it isn't rocket science. Get a book on laying patios that explains site prep, levelling, and base material selection (I have one I like called Patios and Walkways, do it now do it fast do it right, by Taunton Press), and you'll see that it's well within your reach. Regarding drainage, think about where the water comes from, and where you want it to go, and slope the patio accordingly. Flagstone has gaps that the water can soak in between too, and you're not exactly in a high rainfall area either, are you? If you want flagstone, you won't be happy with pavers.

The unit is lying on its left side facing, and so if you rotate the photo I posted 90 degrees counterclockwise, it will be in its actual position. I met with the first installer today, and he gave me a good price ($4600) for American Standard unit 3 ton, 13 SEER, and that included all installation requirements. What threw me off a bit was that he said if I wanted to install the outside unit where I wanted it in the first place, he would do it there, but it would be against code and he could not pull a permit for it. I told him that I was not interested in doing anything against code or without permits, but I guess some people do. We found another place to put the outside unit that would go through my garage and not ugly up my back yard. The guy from Westchester will be here tomorrow after work to give me another estimate, and then someone from Bryant will give me an estimate next week. I wasn't planning on having more than two estimates, but I guess it is better to have three, although I may cancel the Bryant estimate if I decide to go with the Westchester guy. It appears that there is room for the condenser in my attic, but some of the ducting will have to be moved somewhat. Also, the heater needs to be reattached because it is being supported by straps at the moment, and the guy today said that he would replace those with brackets. Lars