Can a retaining wall follow a slope?
I built a retaining wall in a situation very similar to what you described. In my case the wall drops approximately 12" over 40 feet. It has 3 courses of 6" Keystone wall blocks. The first course is mostly buried and the wall is about 12" high over most of it's length. I also put about 4" - 5" inches of drain rock behind it with a landscape fabric barrier.

This was 15 years ago and it seems to be holding up just fine. I would hope that the 4" blocks you want to use will be ok. However, I've worked with that size some doing garden walls and they are definitely less stable than the bigger blocks.

One other consideration here is aesthetics. Make sure looking at a retaining wall that isn't level doesn't bug you! Sometimes I look at mine and wish I had installed it level and stepped it down instead. 

In the area where I live we have an assortment of gravity block retaining walls and the ones that follow the slope usually don't look as good in my opinion.

Here is a photo for reference: