There are no absolutes in life, so I'll amend pls8xx's statement: The new wall will very likely fail if constructed as you say. You're in a freeze-thaw part of the country, which is why your footer needs to be below frost line. If you attempt to "float" the footer, the expansion and contraction of the soil will heave and crack the footer, the mortar joints in the CMUs, and the brick veneer. You also need to consider that with a 3' high wall, the forces attempting to knock it over are pretty intense. Without being tied to a proper footer, and without vertical steel reinforcement, those forces will eventually win and your wall will very likely fail. Again, no absolutes in life; the brick piers on my 100 year-old house go 6" into the ground and sit on bare earth. But if you're taking the time and expense to do something, why build in the probability of failure? As to the EP Henry wall solution... did that quote also include demo & removal of the existing wall and related sitework? If so, they may not be that out of line. If you approach it as a DIY job, you may be surprised at how quickly $X per ton of disposal adds up. If you do the project yourself, be fanatical about following the manufacturer's instructions. These systems are designed so they can be installed without special masonry skills, but you still need to be very accurate in preparing the base. If you don't feel like you're spending a ridiculous amount of time getting the first course of block perfectly level... well, you're probably not doing it right. If you want to put a fence back on top of the wall, Keystone makes a system that'll hold the fenceposts securely within the structure of the wall. Might be worth looking at. Best of luck!

I don't think the vertical layout of your block wall is the problem, that's the way they are supposed to be. If it is failing perhaps not enough rebar with concrete fill was used? Here the alkaline soil combined with water is destructive to concrete and a special mix has to be used but that may not be your problem. A nice look used here that is more expensive than regular block but a less than real stone is stone faced block and it is zero maintenance. Since your neighbor is going to be looking at this wall perhaps he would help pay the difference between a cheaper wall and one he would enjoy looking at? If your aggregate stoop is concrete with rocks seeded on top or brushed to expose internal rocks then you can put mortar and pavers over the top of it. Do talk to your neighbor though about your wall, you never know if you don't try, Maria

There is no technical reason not to use modular block (also called segmental retaining wall or SRW - what you are calling a "paver"). If you go with a mortared block wall, you should have a footing below grade down to the frost line which adds considerable work and expense. If you don't, it will crack from freeze/thaw movement. One benefit of SRW's is that they are designed to move with the freeze/thaw cycle. That eliminates the need to put a footing several feet down in the ground saving on excavation, material (you don't need blocks between the footing and grade), and not having to destabilize a slope with a deep hole at its base while constructing it. Another benefit is that they do not require a high degree of skill and training to construct, so you have a lot more and cheaper people available to build these. They are an easier DIY project, but not that easy. Still another benefit is that they are rather easy to drain. Water buildup in the soil behind retaining walls is often the cause of wall failure. SRW are not universally loved. In some places they are seen as high class and in other places they are accepted as cheap looking suburbia or industrial park looking. It depends what part of the country you live in and the taste of the area. Stone walls (well crafted) are seen as timeless and universally accepted as high end. They cost 50-100% more than SRWs due to the skill, training, labor time, and availability of qualified people to do the work. We do not see very many stucco concrete block walls in my area. I don't know that I have seen a new one at all. The SRWs and stone walls have replaced them. Their failure rate has something to do with it since many are not built on proper footings.

After 1971 quake in San Fernando area my dad talked to man that was really upset about his very long wall & how much it would cost to repair or replace it. Since it was on level ground & just a foot in on his property from sidewalk my dad drew him pilasters to put up every 8-10 ft. They are cement wider at bottom & have rebar in center & are up against side of wall that was leaning out toward street. Wall was only leaning not broken anywhere.At top the cement is narrowed. Looks like it was meant to be that way. I drove by it yesterday & it is still in great shape. About 200 ft. long. He mixed cement up himself after dad helped him brace it with 2x4's once pilasters were cured all braces removed & looks like it is all original. The cement was just smoothed& is narrower both ways at top so from side it is narrower than at bottom & looking straight on it is narrower as goes up. I think dad had him dig down about a foot to embed the rebar, can't remember is dad made him a form or not. Dad is 95 now & had stroke so wouldn't remember but the man saved a lot of money & since it is on a corner it was all his responsibility. No neighbor to deal with. Good luck. Oh, wood rots so cement would be better. If fence in good shape might be able to sink steel poles in next to it but wouldn't look professional like 1 my dad helped guy do.(At no charge I might add).