I would try a quilt of shade loving groundcovers. The aforementioned sedges (Carex), some vinca (Vinca minor), ivy, Siberian cypress (Microbiota decussata), spreading yews (Taxus). MIx it up a bit so it looks interesting all year and also to see what will do best in your site. You will have to water in the first year to get things established, but after that everything should take care of itself. In order to keep the soil in place while the plants are growing in you might want to invest in erosion matting like the highway departments use. You can find it at http://www.forestry-suppliers.com.