It is good to see detailed discussion on a topic, and a very good way a modelling passive resistance of soil has been presented. However, I have reservations on some comments.
In this case the support condition hinge (i.e zero horizontal displacement) cannot be assumed for basement walls at slab levels as diaphragms are undergoing considerable lateral displacement.Therefore, in order to evaluate flexure in basement walls it is advised to model a line element along the height of wall (meshed at wall area edges) to compute flexure in basement walls rather than using theoretical model of prop canti-lever assumption that seems to be invalid due to diaphragm's horizontal movement .
Assuming the diaphragm as rigid, there will be negligible in plane displacement of diaphragm with respect to its supports,which are vertical elements of lateral load resisting system, at particular story-level. Lateral displacement of diaphragms is with respect to story-levels. Hence, the support provided by slab to basement wall, at a particular story-level, can be considered as hinge as it will resist translational movement due to in-plane stiffness of rigid diaphragm.
Why would someone be worried about out of plane displacement of basement wall, when it will be proportioned for out of plane forces( earth pressure). As it has been correctly been pointed out that drift limits in building codes are intended to control NON/STRUCTURAL damage, and to limit secondary forces due to P-delta effect. The point is: one should be worried about drift of frame (in/plane relative displacement), rather than the out of plane displacement of basement wall.