I don't think the idea of placing the L-blocks as the neighbor described, on the boundary line (or just before it), is that bad. What height of blocks are we talking about?
The foundation has to be built on your side and there will also be soil on top of that. If you then also put a fence on top, everything is actually quite good.
What actually bothers me now are two things:
1) The neighbor's attitude.
2) The lack of planning on your part.
Regarding the first point, there has already been enough feedback between "kiss my ass" and "no," your absolute right.
Regarding the second point, there is still enough room for planning. Does your property slope toward the boundary? Are you thinking about maybe adding fill?
I think the best approach could be that you agree on the position individually with the neighbor (e.g., 50cm on your side / 30cm on the neighbor's), he makes the L-blocks high enough so you can add fill, and he pays for the whole thing, including blocks and installation. Once you have leveled, you pay equally for the fence on top.
That's how I would handle it.
Of course, what's important is a contract about the construction costs, maintenance, and upkeep. If he wants, he can have that responsibility and be left holding the bag.