Cost of block wall varies greatly based on what block you want. I like the look of block walls and the fact that there is a huge choice in styles/colors/sizes. Big difference in quality too from the big box stores and a real stone/hardscape place.
True retaining wall blocks have a lip on the back edge that catches the course below. It also creates an automatic setback for each course - the wall steps back slightly from bottom to top. When figuring qty of block required, know that usually the first course is below grade.
When built correctly, 5ft walls have no problems. Can't speak about engineering requirements, where I live I can pretty much do whatever. I have about 120ft of wall behind the pool that goes from 1ft to 5ft in hieght to follow the natural grade, with a set of steps in the middle. Aside from some minimal horizontal settling, the wall is sound, been four years now. My soils are hardpan/clay poor draining and we have deep frosts.
Taller walls will need geo-grid (brandname?) layer every couple of feet. It's a plastic mesh that gets layed between courses and runs back into the bank a few feet. When the backfill is compacted/settles the mesh locks the wall to the earth.
As mentioned, drainage is important behind retaining walls. You don't want water building up, especially in freeze zones. Drainpipe is usually laid in some stone at the base of the wall and run out to daylight at either end.