moopups said "A mix of builders sand and cement will eventually harden to stone like toughness."
I'm not clear on the process here. First of all, sand and cement, without water, in bags, will not harden to stone like toughness. The mix may harden gradually, but it will be low quality concrete. This may be the crux of the problem in your jurisdiction. I seem to recall another posting regarding these structures that said the people promoting them would provide engineering assistance to get zoning approval.
If you were to place steel pins (rebar - vertically), would this not be adequate for wall construction?
This is not a given. Since the concrete is in bags, the rebar would tie them together, but may not be viewed as adequate support for the load on the structure. This is where engineers and architects come into play. If you take a design that has been built in another local, you may be able to take advantage of the engineering work to get it through your own inspector.
While the idea seems dirt cheap, the method applies to the shell. A lot of the cost of the house goes to the other details, like the foundation, electrical, plumbing, heating, interior finish, appliances, doors, windows......
Just what is it that appeals to you in this method???
GObug