I've got to point out, you've got to have the right climate for these earth-sunk homes. Insulation works great when it's dealing with convected air (IE protecting your house from freezing cold outside, and with building paper from a harsh wind too).
Whilst the earth provides great protection against summer heat (thermal mass), it offers you nothing against the winter cold. Seriously, I question this house surviving a winter in liveable condition. By his drawing, there's likely minimal to no foundation structure, which means his retaining walls are relying solely on their mass to hold back soil. Note that frost heaving can exert a force of 14,000PSI and you better hope your wall is big enough.
Modern built homes in cold climates (where I live, Canada) rely on footings below the frost line (so your house doesn't split in two or more pieces), the basement floor and first floor joists to supply the lateral forces to resist the freezing soil. Simply put, rocks on soil and timber shallowly buried is a serious danger if a heavy freeze gets under any of them.
I didn't say yurts were cold, they normally have multiple layers of canvas (or similar material) that acts as very effective insulation. Air gaps are often better than foam. IIRC <3cm of air cannot convect, meaning from a well formed air gap you could be getting a far higher R value than an inch of extruded/spray foam insulation.
What I said was that ramped earth walls provide little value in a winter climate and are in fact extremely dangerous. >4' of dirt against a laterally unsupported foundation wall is actually illegal in my municipality. I see no lateral support in this guys structure. His walls would have to be incredibly thick (which they don't appear to be) to support the weight. The timbers need to go down a sufficient depth, which without the use of machinery, is unlikely to have happened and unlikely to have had the soil re-compacted properly.
What I'm saying is that the $5000 this guy spent on a 'house' is likely to collapse and kill whomevers inside the minute frost gets anywhere near his walls, let alone under the foundation or timbers.
A yurt on the other hand, due to its tent like structure and completely using flexible building materials would cope extremely well with differential frost heaving (which is what cleaves houses in two).
If the houses foundation doesn't extend below the frost line, you've got two choices. Heat it like you want it to spontaneously combust, because you want to keep the frost line well away from your structure. Or 2, ride it. I've seen many cottages here in Canada built on grade that have survived decades of winters because they aren't tied to the ground they simply move when shifted.
In terms of heat the single slow-combustion-wood-fire will be plenty (assuming a good wood supply) to heat this relatively modest space in winter (in Wales).
As for the frost, it might be an issue in a real heavy winter, but Wales is not Canada. Also, the dissapating heat from the building will help, and timber is inherently far better at handling structural stresses than concrete/steel/etc. That said, I hope for his sake the hill-side retaining-wall is built well (well-drained, structurally strong, etc.) to ensure this doesn't happen.
Not saying it won't cause an issue, but I think you overstate the case somewhat.
In Wales, no this isn't likely a problem. However, due to temperatures staying near-zero it can be worse on a structure if it's regularly cycling below freezing at night.
I wouldn't trust the retaining wall if it wasn't at least 20" of masonry when it's laterally unsupported. Flagstone walls here with lime mortar, laterally supported on floor and ceiling cope at around 14" thick, at which point they can support 6' 11" (by the municipal bylaw) of earth, his walls are laterally unsupported, and by law here can't support more than 3' 11" (if built with a strength equivalent to 8" of 15 Mpa poured concrete, locally about a 14" flagstone wall). Well drained soil will help, but when you're building a wall into the face of a hill, you're being stupid and putting your house below-grade.
I seriously expect this house to fail in a bad winter. I would trust this house in warmer climates, but definitely not in anything colder. I'd also like to know if this guy got approval by a structural engineer, because I certainly didn't read it when I glanced over.
Whilst the earth provides great protection against summer heat (thermal mass), it offers you nothing against the winter cold. Seriously, I question this house surviving a winter in liveable condition. By his drawing, there's likely minimal to no foundation structure, which means his retaining walls are relying solely on their mass to hold back soil. Note that frost heaving can exert a force of 14,000PSI and you better hope your wall is big enough.
Modern built homes in cold climates (where I live, Canada) rely on footings below the frost line (so your house doesn't split in two or more pieces), the basement floor and first floor joists to supply the lateral forces to resist the freezing soil. Simply put, rocks on soil and timber shallowly buried is a serious danger if a heavy freeze gets under any of them.