Keeping air in and radiation out aren't concerns on Earth, so other factors prevail in deciding where to build a settlement.

Maybe. But if you have a canyon, you can use three natural sides, cover the top and one side. The side you can expand as needed.

Cities on Earth don't need to be protected from toxic soil and hard UV radiation. Instead, most cities on earth have been built near rivers for cheap transportation. Castles and fortifications are built on hills for defensive value.

Floods and earthquakes make canyons sub-optimal for settlements on Earth too.

On the other hand, cities on Earth are very often bounded by other natural features like rivers and mountains that naturally constrain easily-usable space. On Mars it would seem to me the solution to needing more space would be the same as on Earth - build another city.

On Earth, you don't even want these walls. City walls were for defense, building in a canyon just gives any attacker the high ground.