Just joined and saw your topic. In Chicago, your winters are going to be similar or worse than mine in Pennsylvania. I'm in the process of building my second pond that involves above ground stone work. My first is now 17 yrs old and no signs of problems. I've seen a lot of mention of block but not a ton of comment on foundations. I don't know about access to your yard but I highly recommend you have the foundation poured. The concrete cost is minimum and a good foundation makes the walls so much easier to build. I also didn't see what volume of a pond you are planning and what volume is above ground. The pond pressure is what is critical. With soil, only a limited depth of soil contributes to the pressure against a retaining wall. In a pond, all the water above ground contributes to the pressure. The pressure on the wall at the top is much less than the pressure right at ground level. A three foot high pond of 4x8 dimmensions only exerts 166 PSI at the one foot of depth. But at the three foot depth, it puts just under 500 PSI on the wall. Expand that same 3' high pond to 10x12 and it's 624 PSI at one foot and 1871 PSI at three foot. Since water is liquid, the entire volume above ground is exerting water on the wall as opposed to soil where only a certain amount of soil causes pressure on each block.
So yes, stone is the way to go. But back to your foundation. What I found sucessfull was to basically dig a trench in the ground for my wall's foundation. Dig it at least 15", preferrably 20" wide. The foundation should be at least 12-15" thick. And you want the top of the foundation to be about 3" below the finished grade. So overall you want it 15-18" below your final grade. I then dig a post hole down at 3.5 ft below the final grade at all corners and every four feet of wall. Once dug, I put in vertical rebar in the post holes and horizantal rebar in the trenches and tie to all together. I also used short vertical rebar about every three feet as well in the trenchs. These are set so as to be at the exact height you want the top of the foundation to be at. With three foot spacing you can lay your 4' level from one rebar to the next and get them very precise. You do a single pour of concrete, right to the very tops of those vertical rebar. That makes it much easier when pouring to know where to level off at. If done right, you can just make out the rebar tips in the concrete. By using the ground as a form, you save from having to build any forms. Now you can dig out the ground around the pour and grade it as needed.
If you did this pour correctly, you should have a very level surface to lay your block on. Taking care at this stage saves a ton of headaches later. With the rebar and 3+' post holes, you should never experience any frost heave on your pond walls. (the pond itself will help keep the ground from freezing as well so a frost heave isn't as likely around the pond. But a minor crack from a frost heave in the wall with all that water behind it can bring it down quickly.
I'm new here but when I figure out how to post pics here, I'll post some of mine while I'm building it. My new pond is 12.5' X 20' by 4' deep with about 20" above grade retained by a block wall. That's about 1800 PSI on my bottom course of block., 1100 PSI on the second course, and 325 PSI on the top course. (water level should be about halfway up the top course of block)
I hope this helps!
Craig