I love your garden and I think your idea of a "pot" garden is a good one for your problem area. Lots of ways to approach it, but the first thing I would do is probably dig out at least some of the soil and add gravel several inches thick in the bed. (I'm forgetting about the water problem, because I don't really know how much water or how it drains).
Perhaps a vapor barrier underneath the gravel and running up to just above the stucco wall base...like a pond liner, covered with gravel. Once the basics are done, then I would cover the basic gravel (road base) with either small river rock, some sort of smaller decorative rock (I stay away from pea gravel because it goes everywhere), or even the round hydroponic clay balls depending on your budget. I just like the look of the clay balls design wise and they would retain overyspray water from watering the pots.
Tall stuff in back....perhaps a large potted Bird of Paradise or a small palm, anything tall as a backdrop. Then it's just a matter of how you want to do it and how many pots you want to end up with. You can stage smaller pots with concrete blocks as a base to achieve various heights, placing another pot in front of the block to hide it....or make a stair step planter out of concrete block and use them to stage your pots.
Depending on how you arrange your blocks, some of them could be planted with ground covers that would eventually creep and crawl in among your plants, while others would serve as stands for your pots. It's all a matter of personal taste, but I like to mix all kinds of pots together (glazed, plain terra cotta, fancy terra cotta, etc) to give it a casual look rather than something too formal. That way you can highlight a few very special pots facing forward and the rest of the more ordinary pots can hang out in the back and only show the foliage. A lot of the way you arrange it depends on the kind of plants you want. Succulents and cactus are easy, can stay outside all year, don't require a lot of care and take little water. All day sun will pretty much determine what kind of plants you choose because pots dry out very fast!
Another way to stage plants is to use tiered racks that give you a way of highlighting a collection of plants. So much depends on the look you want....soft and lots of green or the succulent look or a combination of the two.
Pots of various sizes can also just be set in the gravel......it's an easy look, can be arranged and rearranged at will....could look very pretty with some of the gold moneywort (assuming there's enough summer water) running around under the pots.
Hanging something on the wall would also give some focus to the area, although the arbor/fence is already there so I'd probably go with a decorative metal piece or a mirror or an old window or a terra cotta piece (s) Do you need access to the utilities on the wall?
How about a bench and pots? or a large something.....like an old trunk (it will eventually decay, but I'm talking decorative junk!) filled with overturned buckets and the plants staged on top of the buckets (I use cat litter buckets for lots of things!) Old garden tools on the wall or old garden hats on the wall over a bench.....so much depends on personal taste.
This is all just stream of consciousness going on here......your garden is very charming, I'm sure you can put something together. I think the base is important and then the personal artistry comes into play.
Again, just ideas to play with......my fee should you decide to accept this challenge will be two images of the finished product! This message will self - destruct sometime soon. :-)
The image below isn't exactly like your situation, but it shows part of my succulent collection staged on three tiered racks.
