I think that the sense of escape is vitally important to Walter's day dreams.  His day dreams involve feats of daring, images of self that are filled with valor and intensity, and these conceptions are the opposite of how Walter lives his life and is perceived in what certainly could be seen as "the desert of the real."  In the end, his day dreams become the domain where he is able to exert freedom, control, and intensity.  These are elements that are not in abundance in his real life. Of particular note would be the lack of emotional connection that is present in his real life, and his dreams might be the realm where some level of emotional satisfaction is felt.  This is why he forgets in the real world, for his true emotional compass is invested in his dreams and not in the real.

In his day dreams, Walter Mitty is treated in a way that is totally different from how he is treated in real life.  In real life, everyone looks down on him.  They kind of hold him in contempt because he is unable to simple things like parking his own car.  But in his dreams, Walter is able to do pretty much anything and people look up to him.

As for your second question, I see two possibilites.

• He is really a complete loser who can't remember anything, especially because he's too busy dreaming.
• He is fighting back against his wife's tyranny in the only way he really can.