Ah, Muttley, it's good of you to ask.
   My wife believes waltzing with bears is another way of saying "gone 'round the bend" or whatever phrase you prefer for losing one's mind. And since Uncle Walter lives with his niece or nephew, it suggests he's a fellow of advancing years. Hence, Alzheimer's.
    I see the song as a children's story, like "The 12 Dancing Princesses" who go mysteriously disapper every night to go dancing.
    It's open to intepretation, like any work of art.