First the blocks you are describing seem plenty big enough for a 28" wall. You are talking about 7 blocks high. I would personally use a taller block but I like making the install go easy. Smaller blocks I believe are more work.
I have used LIQUID NAILS® Landscape Block, Stone & Timber Adhesive
However I only glue the caps (top layer to the second to top layer). The other layers shouldn't need it. Either way the glue will last only a few years if you are in a temperate climate.
I also would not install blocks without a lip for any area that will be walked on that is that high. Having a lip or not really matters with the amount of frost your region has and the amount of traffic in the area.
