Not all of it, that's the point. Some pure carbon (charcoal) is left that makes good soil amendment. That carbon doesn't make it back to the atmosphere unless somehow burned.

I think you have to consider what you're comparing against. Are we comparing to just not cutting trees down? Trees fall and decompose, while wood buildings can last for centuries. Admittedly building 300-year houses seems like a pretty different idea of construction than what we're doing now. So it comes down to how long you expect the building to last, but it's important to remember the carbon in trees will eventually be released into the atmosphere in any case.

But! It's also important to consider what timber houses would replace - concrete. Concrete is not very climate friendly. Throwing that into the equation, I'd be surprised if wood construction wasn't better for the environment than what we're doing now.

It doesn't need to be sequestered eternally, it just needs to be captured and sequestered at a faster rate than it's being produced (from fossil fuels and decay/burning of wood).

Where I live (Kitchener-Waterloo), there are a lot of old factories with heavy timber frames and solid hardwood floors. These factories have since been converted into nice condos and commercial properties, with all of that wood preserved intact. The old timber beams and hardwood floors are actually very nice now.