I built a foundation for a greenhouse and use the blocks with open ends (U-shaped cross section) for the top course and laid a horizontal rebar in there before filling the cores with concrete. That would tie everything together on your foundation. If you're talking rebar drilled in every 4 inches along the wall, that's way overkill, or I'm misunderstanding what you said about that. If you already have blocks with solid ends, if you're careful, you can knock the webs out to give space for a horizontal run of rebar. If you tie the horizontal rebar to the verticals, that will make it pretty much hurricane proof (I welded them together, which was probably overkill, too.)
I would set the blocks flush with the edge. That prevents rain from puddling on the slab at the outer edge if they were set back.
