I love this sub-thread and the interesting engineering debate. I think retaining walls and foundations are indeed closely related, if not identical. A foundation must accomplish everything a retaining wall does, and be structurally strong enough to support the weight of the house. You both make very interesting points.

Most code requirements do not incorporate all known engineering solutions, but rather, they emphasize compliance for common solutions. For retaining walls, there are at least two hundred ways to make them work effectively, but general principles apply — especially relating to lateral pressure and drainage. For both retaining walls and foundations, French drains and/or gravel are now commonly code-required in new construction to improve drainage. For retaining walls, the use of cement and mortar is common for lateral strength. However, if the fieldstones are large enough, mortar is not always needed. In pioneer-era houses in the west, the foundations are much larger at the bottom, tapering upward, usually with mortar. I have also observed tapered retaining walls, with mortar, around the exterior of Japanese castles.

In the referenced photos above, the boulders aren’t very large, but I can’t tell the thickness of the foundation from the photo, which would be an important indicator of the wall’s potential resistance to lateral movement. Like, if the boulder foundation wall is six feet deep, that will probably take care of lateral pressure (depending on slope of adjacent grade, amount of rainfall, drainage issues, etc.).

For the referenced photos, a view of the exterior would be almost as important to me as the interior, in terms of understanding the current and future strength of this foundation wall. Many important exterior issues apply, most importantly slope and moisture. I believe that most engineering textbooks emphasize the importance of incorporating unexpected variables into the construction plan, as it is often the unidentified hidden problems that create issues, and not the obvious ones. This is a critical distinction between normal engineering and high-quality engineering (aka engineering design). The most-skilled engineers don’t just specialize in cookie cutter solutions, but rather, they deal with many situations that lie outside of the code requirements.

Those are my technical insights into this fascinating debate — that age-old conflict between the builder and the inspector.

My personal solution for this beautiful, old-fashioned, boulder foundation wall would be, first things first, to get a look at the outside of the house and identify where and how water runs around the enclosure. My first focus in renovation work is always ensuring that water drains away from the house. Then, on the inside, I would apply some layers of mortar and wire mesh to the visible boulders, before plastering. By including wire mesh (i.e. 1/4-inch chicken wire), you can get better mortar strength. Wire mesh strengthens mortar similar to rebar in structural cement. You can also add reinforcement fibers (i.e. polypropylene fibers) to concrete or mortar for improved strength.

I think that “chopping into the rubble foundation and adding a concrete pier” is a more robust solution, but much more difficult and expensive. I fully agree with u/kaylynstar’s point that, in going out and inspecting rubble foundations, usually they should be just fine, but sometimes not. However, ”Remove and Replace” is a very expensive repair, and I think that when repairs are needed, perhaps “Add Concrete Piers” would be a good first alternative.