The excavated soil should be as large as the tree's drip line.

I'd email your local extension service. My parents had wells for the big oaks in their front yard. The wells are all filled and the trees are fine. You may find filling gradually will be okay, which would mean a less permanent retaining structure.

And the extension service - as well as all other reputable sources - will tell you that layering even a small amount of soil (more than an inch or two) over the entire root system can deprive the tree roots of oxygen and smother them, leading to eventual death. I would research this carefully and be cautious about how you proceed.

Yes to all of the above.

For clarity, I'll post this image to show the basic concept of how things need to be for tree to grow in a healthy manner.

I've personally found out, over the years, how important this is.

The root flare needs to be at or slightly above the surface of the soil.

https://www.bartlett.com/faqs/pine-tree-roots

It is very close to the foundation and roots could cause cracks in it.

My biggest concern would be the height, proximity to the house and lightening.

You're doing exactly the right thing by keeping the fill off the trunk — burying the root flare is one of the most common ways construction kills trees. A few pointers from our tree-care crew in central Illinois:

- Keep the original grade intact as far out from the trunk as you can, ideally out toward the dripline. The retaining wall is the right idea; just set it as far from the trunk as practical and keep all fill outside it.
- Avoid cutting roots thicker than about 2" if you can, and keep heavy equipment off the root zone — compaction suffocates roots just as surely as fill does.
- Leave the root flare exposed and mulch lightly (2–3" deep, never piled against the trunk), and water deeply through the first growing season after the work.
- Pines are less forgiving of grade changes than many hardwoods, so the extra care here is worth it.

If the fill ends up covering a large part of the root zone anyway, that's when we have an honest conversation about whether the tree can realistically be saved — we walk homeowners through that call in plain language here: https://treeremovalpeoriail.com/tree-removal-peoria-il/

— The tree-care team at Peoria Tree Removal Co., Peoria, IL