In my opinion, the main conflict in James Thurber's famous story "The Secret Life of Walter Mitty" is an internal one. Walter Mitty is a frustrated and confused little man who feels incompetent to deal with all the problems of life in the modern world. In this respect he strongly resembles the hero of E. B. White's story "The Door," a man who is going to pieces mentally because he feels inadequate to cope with life in the chaos of fast-paced, relentlessly changing New York City. Mitty also resembles George Dane in Henry James' wonderful story "The Great Good Place," another man who is facing a nervous breakdown because he feels incompetent to cope with the madness of the modern world. Mitty is a sane person living in an insane world.
Walter Mitty's way of compensating for his felt inadequacy is by retreating into a world of fantasy. He is constantly imagining himself performing heroic acts in crisis situations. The reader can identify with him, because all of us do this occasionally, although we may not do it as habitually as Thurber's hero. Since Mitty cannot withdraw from real life in fact, he does so in imagination. His pragmatic wife cannot understand him at all. One of Thurber's favorite themes is the eternal conflict between men and women.
James Thurber suffered from eye problems because he was injured by an arrow while playing cowboys-and-Indians as a boy. By the end of his life he was completely blind and plunged into deep despair. This handicap, which kept him out of World War I, naturally made him feel inadequate, as he implied or stated directly in a number of his stories and essays. In Walter Mitty, Thurber is describing his own feelings and his own tendencies to indulge in fantasies as a means of compensation. His impaired vision was a source of what is called "secondary gain." He used it as a source of much of the humor that made him world famous. His wonderful cartoons which appeared in The New Yorker had to be drawn on enormous sheets of paper and then reduced for printing, because that was the only way he could see what he was doing.
Mitty's main conflict might be described as a fight to maintain his self-respect and independence to cope with his fear of losing them.