I think that there is a little Walter Mitty in all of us. We all fantasize and daydream about how we would act in dangerous situations or situations that test our moral character and we would all like to think that we would behave ethically and morally.
We also fantasize about who we want to be (a surgeon, a wartime pilot, etc.) and think about how our lives would change if we really became one of those things.
However, Walter Mitty daydreams his life away and is incapacble of being successful even in his fantasies because he is often unable to complete them. Meanwhile, he continues to lose face and dignity in real life.
Personally, I do not feel sorry for him because instead of trying to actively make a change in his life, setting goals based on his dreams, and following through with real-life actions, he simply imagines situation after situation without making any real effort to change his reality. It's his own fault that he is unsusccessful.