wrote

I think I came up with a reasonably easy solution per this sketch:

https://photos.app.goo.gl/b39g3QRzR78yHutW6

Yep, thats the best way.

I would add a surface-mounted at the lower level of the step, and this
section of panel will be only 4ft+/- on either side instead of the 8ft
panels.

The alternative of modifying each panel would be somewhat
time-consuming and might not end up looking nice.

Yep, it would look worse IMO.

The other approach of extending the top layer of blocks
right along would work too but would be a lot more work.

Thanks to all for the detailed advice and suggestions.
Please keep alt.home.repair positive, polite, and helpful.