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Anytime you are looking for a structural solution like this you would need to consult with an engineer. But I don’t see any reason that would prevent you outright from having a cantilevered second floor. How far you can go and which materials you should use would for sure be an engineering decision though.
For your final cladding, check here on our page on choosing exterior siding for options. If you never want to go there again, you may need to lean towards metal, or maybe brick or stucco. Most wood products would need to be re-finished after 15 years, or even less when exposed to full sun on the south side.