I believe you said you have a block foundation as opposed to a cast in place concrete wall. Jargon in the trade would call yours a block or CMU (Concrete/cementitious Masonry Units) as opposed to CIP concrete wall.
I am not in a position to tell you what will work, especially as I have not seen it. I can offer some ideas to consider. I gather that the top of the wall is still accessible. Did the footing break and go down leaving a wider crack at the top than at the bottom? or did the wall get pushed in causing a bigger crack at the top? If it was pushed in, has it been pushed back out? If the footing has been broken, I would suggest tearing the corner down, reinforce the footing, and relay the corner. If the wall moved slightly from backfilling pressure, I would excavate the corner to push the wall back into line. I must say it sounds unusual to me for the wall to fail close to the corner, rather than out at mid wall. I would take a hammer drill with a very small bit (1/4") and test vertical cells to verify which ones are filled. You will need to test at least high, medium, low in every vertical line of cells near the failure. If there are any with voids in the filling of the cells, I would make sure to have them at least grout injected, preferably vibrated full of 3/8ths chip mix real concrete. I think the dowels that are being proposed should maybe be longer to get from the good corner well past the break into a portion of the side wall that did not move or fail. I would expect the pins to be epoxied. I agree that a poured floor holding the tops of the walls will strengthen the situation substantially.
The damp proofing will need to be reapplied. I would ask for some form of guaranty based on continued failure, crack increasing, etc for a set term, perhaps 2 years, with a healthy clause about excavation and remedy. It sounds as if your builder wants to work with you. I think both of you should split the cost of having a structural engineer assess and recommend the repair method for each other's protection and continued ability to work together.
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