If that photo is representative of the area in question, then I'd reconsider using this extremely tight space for "outdoor living". And unless I am missing something, that slope is not very severe. Even if leveled, I doubt this area would be congenial to lounging outdoors or utilizing as a patio, etc. Too exposed and too restrictive and without sufficient space to develop any kind of green privacy screening. I'd consider just a mixed shrub buffer between you and the neighboring property, perhaps with a meandering pathway connecting it to more usable areas of your property. Unless that photo doesn't reveal the true slope of the area, I'd say no terracing or retaining walls are necessary or even practical. Can you post photos of other areas of your garden that may be more conducive to outdoor living/entertaining? I still think this is a situation where engaging a professional for an hour or two can be helpful - it is difficult even from the photo to get a good visual and a true sense of exactly what you are dealing with.

If I was lucky enough to have Morels in my backyard, I would just harvest them with a smile on my face and leave the landscaping alone. IMHO I would forget about pavers or anything else that could hinder or damage the mycillium growing under the ground. I would throw some grass seed down, maybe some woodland wildflower seeds and nothing else. Personally I wouldn't even mow the area until after the harvest was complete.

Build a low, square, cedar box that you can set over that drain. You can use if for a seat, and/or put plotted plants on it. And you can simply lift it and move it if you need access. As for the "toilet plumbing thing," you're going to have to provide more detail or a picture.

Yardvaark, thanks for your response! I have taken one other photo. I just realized you asked fur several pics! Let me know if this is any help. By the way, our yard is south west facing. It gets plenty sun after 1 pm except for a portion directly next to the garage due to its shadow.