A couple of factors limit how much water savings this could really achieve:
1. San Diego can go six months without a drop of rain (as your comment suggests), so this would be of no help during those months–the very months in summer when your lawn needs the most water.
2. During our rainy winter months, some people can get away with turning off their lawn sprinklers entirely, so your plan would yeild no savings for those periods.
Finally, leveling a lawn is a HUGE amount of work. And do you have a place for the extra soil?
