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Wood Framing - Upgrade or Not

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I am providing structural consulting to a designer who is adding two small additions to an existing home constructed in the early fifties. The home has very little lateral support - the roof is 2x T&G and the exterior braced walls are secured with let-ins and stucco finish, no plywood. The home is essentially a post and beam construction with plenty of glass.
 
My dilemma is that I would like to simply replace the Let-in wall braced panels with plywood. Running the numbers won't balance. I can't really follow conventional framing standards since the panel heights are too tall.
 
The owner does not want to redesign the exterior of the home and the city is not requiring me to re-balance the lateral into the structure. I don't feel that the home will perform well as is. I know that my proposed plan will not bring it up to minimum compliance, but I am confident that it will add some additional rigidity and some added protection.
 
Considering that I am too involved to back out, can anyone offer some advice as to what they have done in similar situations?
 
Thanks
Dennis