(cross-posted to alt.home.repair)

I'm hoping to get some advice on
what to do about erecting some kind of privacy screen or fence along my
back property line. I have a small lot (1/8 acre) with a 3'+ concrete
retaining wall along the back edge. My neighbors' yard behind me is
elevated about 3' from mine. Here is a link to some photos:
http://www.flickr.com/photos/37849137@N00/

These neighbors recently removed the privacy hedge (see photos) from
along their back property line. From our backyard, we now have nothing
between us and the back of their house, the back of their (ugly)
strorage shed, and the (busy) street in front of them. The removal of
this hedge has destroyed the privacy and coziness of our outdoor space.

So here are the some of the options that we've been considering, along
with their respective issues and drawbacks:

Option #1: Erect an eight foot fence along our back line just in front
of the retaining wall.
Problems: our town puts a limit of six feet as the highest fence you
can put on your property line without a variance. Getting a variance in
this town is reputed to be a torturous process. I would argue that
since our yard is three feet lower than the neighbor's yard, we would
really only be putting up a five foot fence, but that's an argument I
would have to make via the variance process. We've thought about just
putting one up anyway and hoping no one notices. But then there's also
the problem of finding a contractor to do the work.

Option #2: Put up a six foot fence and then extend it with some
trellising, a la this method:
http://www.hammerzone.com/archives/l...d1/lattice.htm
Problems: seems like a pain and I don't really have time to do the work
myself. Is this really so different from an eight foot fence that a) a
contractor will agree to do it, and b) the town will look the other
way?

Option #3: Offer to pay for a six foot fence on my neighbor's property.

Problems: even if they go for it, they are getting pretty old and
there's no guarantee how much longer they'll be in the house. Still, I
could justify the $2k for a few years of privacy. There's no guarantee
we'll be in our house five years from now either.

Option #4: Put up a privacy screen of 6-8' plantings.
Problems: Our backyard is so small to begin with, losing another 3-4
feet along the back line to a row of plantings would make it
claustrophobic. Plus it's really expensive to buy plantings that big.
Plus we both really hate arborviteas, which is the only plant that
anyone seems to recommend for this kind of thing in our climate
(Massachusetts).

One last question related to the fencing options: should I be concerned
about negatively affecting the integrity and stability of the retaining
wall if I'm digging four foot deep post holes directly in front of (or
behind) it?

Thanks a ton for any feedback or suggestions,
Jay L.