10 Units of Dirt is the maximum you can hold, until you learn "Laboring", which ups that to 15.
You make mounds of dirt, but there is a slope height limit of 10 units. It is not possible to create artificial cliffs.
A Dirt wall can look cool, but won't do anything for you defense-wise. Also, Walls complain if you try to build them next to steep slopes.
A Metal Shovel is a truly great tool, but you can also improve your digging ability by slotting artifacts into your clothing. Every "Enforced Seam" increases your dig-progress by +2% per time unit, and each Feathered Brooch gives you +1%.
More information can be found on the wiki article:
http://salemwiki.info/index.php/Dig