From your angle, the hydrostatic force would be an extra uplift buoyancy from the water pressure difference between the top and bottom side of part 2 (thickness), rather than of cancellation. So the extra uplift buoyancy which is equal to the water occupied by part 2 of wall should be included based on your thinking.For the ground water to raise to the top of the wall it needs to start below the footing. The downward pressure/force for the hydrostatic load above the footing is cancelled by the hydrostatic uplift below the footing.
Exactly and like tj_PE said it's conservative to use the weight of dry soil in calculating your resisting moments and sliding due to friction etc.From your angle, the hydrostatic force would be an extra uplift buoyancy from the water pressure difference between the top and bottom side of part 2 (thickness), rather than of cancellation. So the extra uplift buoyancy which is equal to the water occupied by part 2 of wall should be included based on your thinking.
I think it should be included the self-weight of the water behind the wall between the levels 129 and 118. The final resistance moment will be more.
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