This is an interesting project to say the least. I have one major reservation, thought it is w/o seeing the 'situation'.
As you may (or may not know), normally retaining walls are dug out so that a few inches of gravel can be put in before you start laying block for water issues (among others). Also, drainage pipe and gravel (for back-fill) are placed behind the wall, again, for issues related to water. Now, since you're working in an area that 1) is along a creek bed where there's water, and 2) you have slope that will be 'delivering' water in a rain, I think you're gonna have problems UNLESS you tie the wall into the slope behind it.
I haven't been to the beach this year (but I am going for a week beginning this weekend) where I can see if anyone is using interlocking blocks along, say, the ocean side of their property or along a waterway. Since you're working in a stream area, the ground 'beneath' your new wall has the potential of being washed out very quickly. I guess you can 'lay' heavy stone / large gravel along the outer-BASE of your wall so that when water DOES run along it, it doesn't erode the ground there. BUT, you need large enough stone such that it, as well, doesn't get washed away. Since concrete walls and 'timber-type' walls (in which the latter has the timbers tied to each other) act as 'one piece', then since they're tied into the slope behind it, it moves as 'one' (or not at all.)
What I can suggest is a few things. Go ahead and drive around where there are properties that have streams running through them and see what they do. (Maybe they use interlocking blocks!) Ask the homeowner if they can take some time to tell you how they built their timber / stone / whatever wall. (I suggest you write to the 'resident' and tell them who you are, where you live, your phone #, and see if they'll call you. It works better than a 'cold' knock on the door.) ALso, you can contact the mfgr. of the interlocking blocks for ideas. And thirdly, while you're driving around and talking to mfgrs., wait to hear what others have to say here. For now, my best to ya and hope this helps. (I'll be watching to see what others have to say.)