Q: If the wooden retaining wall is buried indefinitely, what unanticipated problems could it cause?
A: Decay will eventually consume the buried wood, so removal is an absolute requirement or it will almost certainly affect the finished grade above at some future point in time.
That said, if it is indeed a retaining wall and not just something decorative, it will need to be excavated and replaced with a suitable structure, which will likely require an engineer to provide the answer on what is suitable. Since we don't have any grade/soil information regarding the location it's hard to visualize what's going on here or what might even be a viable solution.
Now, you did mention "it is not necessary" concerning the wooden retaining wall... I can only assume your implication is that it is entirely decorative in nature. If this is indeed the case, you can probably remove it and simply regrade the embankment, but without that grade/slope and soil type information (at the minimum), this is simply an opinion based on speculation. One way you may find a suitable answer without an engineer or similar professional performing a site visit is if you have access to the original site plan of the area and the original plot plan for the lot/site shows that area did not originally have a retaining structure for the embankment, you would probably be safe in returning it to its original construction.
In the end, I would suggest that you contact a local contractor that does excavation work and have them come visit the site. This probably isn't something you want to do yourself anyway, and we really don't know your relationship to the issue, so getting a contractor involved is probably the best course of action as they can guide you with the specifics of what is needed to address this issue correctly.