All - thanks much for the feedback. To answer a few questions....
First, my backhoe is very tight ('02 model with 1700 hours) and although I'd like to save some bucks on my retaining wall, I don't want to do it at serious risk/damage to my hoe. I guess the question will be how much would the shock be reduced by pounding the posts into dirt, versus concrete work.
RE the speed of the manual slide hammer, it's taking the two fence guys about 5 minutes a post. When you consider that the posts are being driven on the edge of a pond embankment, and that they have to constantly reposition their farm tractor to line up perfectly on the post, and that it takes a couple of minutes to pound the post down to refusal, etc, the rate that they are achieving is realistic.
The backhoe mounted ram offers the advantage of not having to reposition the tractor with every post, and it should "vibrate" the posts into the ground much faster than the slide hammer. One option that bears considering is using a smaller hammer - the 1200 lb size is appropriate for my 420D, but apparently Bobcat's are able to use hammers to drive posts also and they have a much smaller hammer. This may reduce the wear and tear on my backhoe, albeit at a slightly slower pace. Does anybody have any experience with different capacity hammers on the same hoe, and if the wear on the machine is significantly reduced? Also, are there any types of rubber pin bushings, etc that might minimize the wear by absorbing some of the shock?
If you can picture a sloped hill that goes down to a pond, and at the edge of the pond water a retaining wall that is built from vertical posts that are butted up against one another, that's what I'm building. I had considered digging a trench and pushing the posts down into it, or filling the bottom with concrete and placing the posts into it, but the problem with the former is that the posts will be loose (remember that water is going to be soaking around the bottom of the dirt), and the problem with the concrete is that it will be difficult to replace posts as needed down the road.
Re potential hammer repairs, it will be a rented hammer, so I can dodge a bullet here!
I will be driving the posts into dense clay, so there will be a fair amount of resistance. I have heard tell of other fencing contractors (not local) who have installed posts in a similar fashion, thus I'm pretty sure that the concept is valid.
Please keep the feedback/ideas coming. Scott