RJT> I know of at least one house around here that's built exactly as
  > described, in that it's significantly under the ground, with only
  > a south-facing full face exposed.
RJT> I don't know the details of the construction, or how their
  > heating bills compare with more typical construction, but I'm
  > sure that the place *had* to pass an inspection before they
  > issued a certificate of occupancy.
Building codes vary widely from county to county. Some counties do
very little inspection. They figure that you better know what you are
doing, or no one's going to buy your house. 
As for as energy savings, I think most places insulate the perimeter
walls, floor and ceiling. I think that's a shame, since so much mass
could be used to maintain a constant tempreture.
 
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