This is a great question. Remember that the Wool Pooh is actually a creation of Byron's that he uses to try and scare Kenny into not going to Collier's Landing, a dangerous place to swim where others have died already. He says that the Wool Pooh is actually Winne the Pooh's evil twin brother who grabs children and pulls them underneath the water. However, when Kenny actually loses his footing in the water and realises that he is unable to get back to the shore, he imagines the Wool Pooh as a big, grey figure with no face and no eyes, with hands that grasp hold of his legs and pull him under the water.
Note too that the Wool Pooh occurs again in Chapter 14, when Kenny enters the church and he tries to pull a girl away from the grasp of Wool Pooh, but fails, and is only left with her shoe:
The light flickered back on and the smoke cleared and I could see that hanging on to the other end of the shoe was a giant grey hand with cold, hard square fingers.
It is safe to deduce therefore that the Wool Pooh can be said to be a creation of Kenny's imagination that symbolises death. Kenny tries to fight the Wool Pooh both times, firstly to survive himself, secondly for the survival of the girl that he finds in the church and fears is Joey.