Another reason for the walls seems to be giving the area some depth and dimension in a park built for large crowds.
If you look at the photo posted near the beginning of this thread, you can see the huge expanse of pavement between Pinnochio Village Haus and the new additions.
The wall breaks that up that space and gives it dimensions.
There isn't enough room there to build another attraction or shop. And even if they did jam something in that area, it would then likely create the same type of bottleneck that Disney is spending a fortune to eliminate near IASW/PP.