Is Walter Mitty considered crazy ?

I don't think that Walter Mitty is considered crazy by those around him because he does not merit that much attention.

If Walter was considered crazy, then attention would have to be paid to him. In the world that Walter lives, he does not merit that. No one pays significant attention to Walter. The people in the outside world treat him with scorn and derision. They laugh at him or simply don't acknowledge him in a meaningful way. He does not experience any significant human interaction. Even Walter's wife does not really pay significant attention to him. She dismisses him as needing a doctor to "look him over" or that he needs to have his temperature taken when they go home. However, she does not examine her husband's needs. She presumes he is fine because her needs are met. No one really pays attention to Walter and his experiences.

That leaves us with our reaction to Walter. It might be easy to dismiss him as crazy because of his frequent flights into his dreams. However, it should be clear to us that he longs for some type of meaningful personal contact. When he dreams, Walter is a person of importance. He has relevance and value to other people. Walter is not crazy for wanting some fragment of this in his daily life. He should not be seen as insane because he wants to be treated as the center of someone's universe. Walter cannot be nuts because he wants to be validated as a human being.

Walter finds in his dreams what he cannot achieve in his real life. We could fault him for being unable to articulate this need to the people around him. He might be worthy of criticism because he does not speak out against the people who denigrate him. However, this does not make him crazy. Sadly enough, it simply makes him human.