While I do believe that Pyramid Head was put in originally for fan service I think they did a good job with it. I mean, it's already been established in two that he's the executioner punishing the guilty, it's in the town's mythology. So Sheperd's Glenn being a neighbouring town it's not suprising at all that they could take the story and change it for a scary tale to scare children with the whole "Boogeyman" motif. James' issues were the whole rape/kink/pillow stuff, so that's what his Pyramid was. Adam's Pyramid (since it was obviously not Alex's since he was ignored by it) is individualized to him as well, one change being the great knife turning in to a combat knife.
That's exactly what's supposed to happen. The town is supposed to evolve. I mean, where would we be if they didn't decide the town could manifest desires and guilt? Just becuause it's later in the series doesn't mean it can't continue to change and evolve or put more information on the already established.
...I'm still turning in the bloody thing for something more interesting as soon as I can though. >_>;