First: Constructed walls should be just like regular, native stone walls.
The Egyptians built out of massive stone blocks and all it took was some round wooden logs and a whip. And Dwarves are specialized stoneworkers! What is the difference between a solid stone wall and a wall that is made out of 3 pieces? The grooves between blocks? Being able to fill spaces with stone gives you the freedom to build where you want and what you want, if you have the time. Even if you make it take much longer than it currently does to balance it out.
- Soil layers are a turnoff for fortress construction. The only advantage is farming. You're pretty much required to dig deeper just to start building, and you can't be sure you won't run into a soil patch a few levels further down too. There goes your perfectly planned engraved dining room. Sometimes the first cave layer is really pretty damn close to the surface, and a vertical fortress is suddenly not viable anymore.
- It would ease the introduction of enemy diggers without making them a huge pain in the ass. It would balance the enemy digging functionality and would enable you to give destroyers and diggers more power without hassle, thereby alleviating much of the turtle syndrome. Since diggers will definitely be in the game, so will breaches. This simply transforms the wristcutting moment of "There goes my painstakingly planned layout" into something fun.
Second: Ability to place soil.
This goes hand in hand with the first suggestion. It makes no sense that soil can be removed without any left over product, it is simply one of those essentials that could be expanded in a useful way. And all you need is a shovel (and again, a whip).
- It would allow Dwarves to shape landscapes. Hills have strategic value for fortress defense, or they can simply look cool. Ponds can be in the way, why not simply fill them up? Rivers have such cool possibilities, why not be able to put down levees and dams and force a river to go another way? The one problem I see with rerouting rivers is that it will differ from what worldgen shows if you abandon the fort. But the solution is easy. Worldgen won't change the river. It is assumed that after abandoning the fort, the river found back to its old bed since the dam was not tended.
- Earth is useful for growing plants and to produce clay. And probably for a bunch of other things that don't come to mind. But really, in a game that has large amounts of digging and is regarded as very down-to-detail, shouldn't earth be represented?
Third: Compost.
Earth is also a product of compost. Compost accelerates decomposition. And decomposition is a big thing! This ties into the whole waste disposal issue. Compost will of course only work for certain materials. Leather, cloth, wood, food, corpses and bodyparts among them.
- There's so much Goblin junk that it skews the whole economy down a very bad slope. Why produce crafts and all the cool stuff that Dwarves produce when you end up not selling a single item of it? Every siege yields two dozen bins full of Goblin junk. Make Dwarves chuck the junk into the compost and receive earth and good fertilizer in return. Make this the main mechanic to receive fertilizer.
- Atom smashers bye-bye. One of the most widespread exploits that almost everybody uses because it is necessary. This should show you that the balance is off.