Neither figures are seen together at the same time in any part in the game before the attack on Eileen. The first time you do see Walter is as a child, in the graveyard in the forest behind Wish House. Then again you see him in the prison, carefully staring down Andrew DeSalvo before turning and walking away. Again, you see him in Richard’s apartment, pointing out the window – and finally he’s in Eileen’s apartment, standing over her brutalized body. Personally I find it suspicious that little Walter shows up wherever adult Walter is attacking, at times in the very same room. (Maybe that’s just me, though, so this is my attempt to explain it for myself.) Little Walter’s behavior in the prison also made me curious: he acted so unlike a child that it was eerie to watch him stare down Andrew while the former guard crouched down and murmured incoherently. It was almost as if the mannerisms of the killer emerged, briefly, in the child’s form.
The first four Sacraments [that we see in the game] passed without opposition from the child – adult Walter was able to kill Cynthia, Jasper, Andrew and Richard without a peep of naysay, or perhaps the child was unaware. It’s only until Eileen is attacked is there a discrepancy, a disruption. But why? Let’s take what we know about all three involved, starting with Eileen.
The only previous contact she’s had with Walter was when she was a little girl, and he a young adult. Homeless and at the time harmless, Walter was given Eileen’s doll to keep him company because she felt sorry for him. Such a genuine and compassionate display obviously stayed with Walter, who undoubtedly did not receive that kind of warmth growing up as an orphan and on top of that an orphan in the care of The Order. Clearly this stayed with him because he kept the doll, didn’t he? So even if you disagree with the emotional impact there is still physical evidence. Eileen is also known as The Mother Reborn. She’s particularly special to Walter. What labeled her a Sacrament is, I believe, her kind actions as a child. Whether she intended to or not she left an impact on Walter that was tainted as Walter concocted his plan for the Sacraments.
There is an innocent half of Walter. This innocent self felt remorse for the Ten Hearts murders, was arrested for murdering Billy and Miriam Locane, and eventually killed himself in prison. I believe it is this innocent half that had an attachment to Eileen, and after Walter created His Kingdom this innocent self turned into the child guise. Whether it be because a child is a symbol of innocence, or contemptuously Walter viewed this half of himself as a child, helpless and incapable, remains up to the players to determine. I think it can be both, though, since both make sense.
The last part is the adult Walter, the murderer. He’s taken his fixation on Eileen and warped it into the desire to make use of her through the 21 Sacraments. I believe this part of Walter cannot fathom how much Eileen’s compassion previously moved him, and that he’s too far-gone with his plans to give a damn.
Taking what I said above, the adult Walter hangs around the apartment complex, knocks on Eileen’s door, and later on attacks her. When Henry enters Eileen’s apartment you find her sprawled on the floor, badly beaten, with the child Walter standing over her. She thanks him, asks about his mother, and urges him to get out of here, that it’s not safe for him. Later on when you have Eileen with you she mentions that “the little boy saved†her from “that man.†But logically how could a child impede a grown man? There’s no physically explainable way for little Walter to stop adult Walter from beating Eileen; but it is plausible that little Walter’s consciousness/form fought and emerged victorious, his desire to save Eileen, to save the only person who acted “motherly†to him winning over his desire to kill her [Also note that Eileen is the only person who expresses sympathy, concern, and compassion towards the child in the game - Henry seems curious and wary, but Eileen wants to help him. She unknowingly takes on a mother-like role].
Think of it as a tug of war. The rope is the form that Walter takes, adult or child, and at either end of the rope is the innocent and the murderer. Neither are in full opposition of the other until the attack on Eileen – until one puts force on the rope in its favour. This “force†is attacking Eileen, so in response the innocent pulls and wins, momentarily, managing to save Eileen. This force is what ruptures the two guises and separates them into halves; no longer is the innocent connected to the murderer and vice versa. In the Building World on the second pass, both adult Walter and child Walter come face to face. This confrontation is a bit tricky considering the child doesn’t even recognize the adult – but that makes sense, if you believe that since the two had never met face to face before, because it was either the child or the adult that took form, little Walter had no idea what the adult looked like. I’m sorry if that seems like it’s a cop out, but I don’t think it is… Little Walter’s focus was simply finding his mother. This desire became corrupted and tainted, bastardized over the years spent in The Order’s care, and in Walter’s own mind. This innocent half is a reflection of that simple desire, before it was tarnished, which is also why the adult is a stranger.
Interestingly enough, even though these two sides are at odds with each other, adult Walter still manages to fulfill his basic need in one of the endings – in “21 Sacraments†adult Walter stands aside and watches as the child Walter curls up on the couch in Henry’s apartment and sighs, happily muttering, “Mom, I’m home.†I think it was always Walter’s intention of being reunited with his mother, regardless of the cult’s intervention and perversion, and even though Walter could very well tell the difference between a room and a human, think of it in this way: Walter sees the cult’s God as the Mother to us all: The Holy Mother. Given the means and the ability to bring her to life, Walter does so – spitting in The Order’s face at the same time as fulfilling his own wish. Therefore both the child and the adult can be satisfied with the results.
I hope something cohesive and intelligent can be pulled from this text. I’m sorry that I can’t write in any other fashion – this makes the most sense to me, but I think it may not be as such for anyone else.
Edit: Bits and pieces that I let slip but still fit:
When Richard's being electrocuted he tells Henry: "A kid? That's no kid. That's the 11121 man!" .. His meaning can, of course, be skewered and is open to interpretation and this is how I'm interpreting it: Richard was able to see both disguises. He pursued the child Walter, tipped off by Henry, and at some point there was a switch between the figures. Richard witnessed it and possibly while in a daze of terrible confusion (as would anyone if they saw a kid.. y'know, morph into an adult) was unable to put up a fight... and the rest we all know since that scene was particularly brutal.
Andrew is positively horrified by Little Walter. He keeps saying "He's gonna kill me, help me," but how could a child pose such a threat? My belief is that Andrew fell asleep (perhaps on the job?), and Adult Walter was able to imprison him in the cell; after this, and some time during Henry's travels through the prison, he's a child again. Perhaps being back in a copy of the prison and being reminded of his time there made the switch over? I know I'm making stretches here, but if the whole theory's abstract why not go for the whole nine yards, eh?
Also pointed out by the Adversary:
After Richard Braintree is killed, Lil' Wally is seen at the window, pointing to Eileen's room. Afterwards, when Henry wakes back up in his bedroom, you can look out the window over to Braintree's apartment: Lo, Walter-as-an-adult is seen pointing at Eileen's room, not the child.