Thank you all for your input.

Putting back a new terrace it not really an option as it was half way up the first floor, making the house look like it was in a pit, and a really awkward.

As far as soil amendment goes, it seems;
*Avoid the timber products, especially for lawns (thanks Sean Straw)
*Compost rich in organic matter is the way to go.
*If I am feeling motivated well rotted manure rotavated in is an option
*Then regular mulching / amendment according to plant
*Maybe raised beds that can be filled with the right soil are the way to go.