One sure-fire way to deal with the drainage is to lay a footer for decorative block with a drain tile along it. The drain tile would be covered with gravel and convey any water effciently to your drain. Another approach would be a dry stream. These are essentially swales lined with river rock and landscaped to look like an intermittent stream. It would carry surface runoff even if you built up a 1-1/2 foot wall. Really, the decorative wall would not stop water flow, it might divert it a bit. Decorative block, perhaps with a drain tile would be an attractive, low cost alternative.
The most attractive option sounds like getting aluminum extensions. basically a top rail and bottom rail with 1-foot spindles set at the same distance as your fence. That would probably be fairly expensive.