I have used 2-3 inches, you probably could get away with 1 inch. It is mainly to level out the ground. The landscape blocks at home depot, lowes have a locking lip. You might not need to do any mortar. They come in different colors textures etc. I think they can be up to 3 feet high when holding back dirt without any additional support. I would think they would do ok with water, but you may want to ask. (I have only used with dirt)
If you use the blocks you have looked at I would go with the ones with holes, use some rebar and cement in the holes to make it real stable.