First, we never recommend putting any kind of piping on exterior walls. Depending on your climate, they could easily freeze in the winters even if they are insulated. So as much of a buffer area that you can put between the elements and your plumbing the better!Also I have never heard of compressed dirt in a wall before and not really sure what this is in your case. It might be something you want to at least call a professional to come in and look at and visially diagnose. I know that it was common in some parts of the Southwestern US to use compressed earth blocks for foundation work, but this was primarily after 1980 and should not have been cut into if that was the cause.
If this is a Cinder Block foundation that you are cutting into, you should stop and fill up where you cut with concrete. There was a time when instead of filling Cinder Blocks in they would use dirt instead of concrete and rebar (which is the correct procedure). Either way if this is a concrete wall you are cutting into, I would not recommend continuing and look for another path the plumbing can take.
I would at this point though recommend that you have a professional come by and take a look at the situation and give you a recommendation on site.