Hi Josh, Kimberly here from landscape solutions for you. Sloped yards are sometimes one of the most frustrating landscapes to deal with. You do have a few options to consider. Your first goal is to access where your water is flowing in your yard. If you are thinking of leveling the slope out, you will want to divert the water away from where you want to have your children's area. This can be done by solid corrugated pipes in a small trench, or you can build a dry rock bed.
A retaining wall will work and you can create a retaining wall using cement, or stackable materials. Pressure treated lumber will also work. You don't have to go real high. This also can be a decorative area as well.
Another option depending on the degree of incline, is to level out the slope using a tiller. My crew and I have done this. The slope also can be used to plant some evergreen shrubs and this will give you a decorative look also.
A privacy fence along the leveled area can be done in a variety of different materials. You can also consider evergreen trees along this area to create a privacy screem. Emerald Green Arborvitaes and Leyland Cypress are fast growers and very popular in your climate zone.
Please feel free to contact me through the contact form and I would be happy to go into details on the different options I have mentioned above. If anyone else has some suggestions for Josh, please feel free to write your thoughts right here in this section.
Thank you Josh for asking the question, and I look forward to hearing from you if you would like my help!