[mnglandscaper]

I recommend removing the old wall. As it sounds, you are gonna be cramped for space anyways. Take out the old wall and then you will have plenty of room to put in the new wall. The new wall is going to have alot more drainage capabilities than the old concrete wall, so you want to be able to utilize that. As for demolition of the old wall, do whatever it takes. Cutting it in chunks sounds like a good way to do it. Then you can get the pieces into managable sizes. I guess what I am trying to say is that I would sleep better myself if I took that old wall out, knowing that it is one less variable that can cause potential failure in the new wall. I know it is only 3.5 feet, but you don't want to take that chance.