Rotting wood: if built properly, there should be little to no wood in contact with soil or water. Assuming your site doesn't have a high water table (which can vary throughout the year), posts in holes should do well if sitting on top of several inches of gravel, with gravel filling in the sides as well. You could also layer those post holes with landscape fabric or something else to reduce the chance of soil reaching the wood. The outer walls should have a layer of waterproof material between the wood and the soil as well. The outer walls will be protected by the several feet of roof overhang.
As far as coating wood with tar, I'm not sure if the house would be very livable afterwards, tar seems like pretty nasty stuff to have around your home. There are other options for protecting wood, searching for "natural wood preservatives" will give you various options, based on what the web page considers natural.
You mention grass, do you mean for the living roof? Does moss require more consistent water/moisture? A well-draining roof might be too dry for moss but I'm not sure. I was thinking of sedum personally, since the roof soil is likely to be very dry relative to the rest of the site. Sedum is a common option for green roofs as it can handle less water. But you could plant a variety of plants based on how much soil you put over the roof and how much rain your site gets, and see what survives. You could put a conventional roof on as well like tile or metal, although such a roof would certainly stand out from overhead (if that matters to you). But such a roof could feed into a gutter that sits on top of the earth berm and collect all the rain to store for later use that way.
Since the wofati design has the waterproof umbrella extending out, there's nothing stopping you from having the edge of that umbrella turn up to create a water-tight channel with gravel and/or drain pipe leading water away to a collection point. As far as gravity fed water, you can locate a water storage tank at some point higher than your faucets. I was thinking of a 200-300 gallon tank built into the earthen berm under the insulating umbrella for mine, which would be touch higher than the sink but not high enough for a shower head.
If you follow Mike Oehler's design principles for light, you should have plenty of light without the complexity/issues of skylights. Keeping the roof water-tight is really important, even more when you're working with a thick, heavy, green roof. But some of Mike's designs are essentially skylights, check out this which has at least one in his ridge house:
The wofati design is based off of Mike's design principles so there's plenty of overlap.
The power systems and gray/black water treatment you use can certainly include a septic system if that's what you prefer.