The answer to your problem is quite simple. Use a commercial grade weed fabric to line the backside of your wall to prevent dirt seepage. This is the same method used in block retaining walls also. Just to note there are 2 types of commercial weed fabric out there, good stuff and JUNK!! The GOOD commercial grade weed fabric is a plastic MESH with fuzzy black material on one side, I highly recommend using this stuff. The other "commercial weed fabrics" out there look like a big sheet of perforated plastic and they are flat out JUNK, it doesnt hold up for long and it tears very easily so stay away from this stuff. The good stuff is available at Davis Seed Co. and its a 3ft x 250ft roll for $101. Smaller rolls of the same stuff may be available elsewhere.
If you dont mind me saying so, I see a problem with your current plan. That problem is that clay retains alot of water, if you live in a area that drops below freezing during winter months the clay is going to freeze and heave(expand) during the winter. Which will in turn push you wall over eventually. To stop this from happening what you need to do is build your wall, line it with the weed fabric, than instead of back-filling with clay, use "Pea stone" as a back-fill. Pea stone is very small rounded stone. It has good drainage which helps prevent water build up directly behind your wall, and also has the ability to shift. When the clay behind it heaves rather than pushing your wall out, the pea stone will shift alleviating some of the pressure put against the back of the wall. This prevents ground heaving from pushing your wall over. Pea stone is very inexpensive per yard and will make your wall last alot longer.
Stone drip edges are also a good solution for what your trying to do. All you need for that is plastic or metal edging, roll of plastic(for use as a weed barrier)and a decorative stone. If there are not plants inside your drip edge using plastic is the way to go, if there are plants inside your drip edge you will need to use the weed fabric I discussed earlier that way the plants will still recieve water. Hope this helps. Good luck with the project. If you need any other pointers on the wall or drip edge drop me a email at dlarose@nycap.rr.com