[Spoiler] s.074 and entity position and walls

After reading s.074, the entity is placed inside the walls. It is stated that it occupies four spaces, but it still is inside walls. does it mean that it cannot reach the dreamers with its basic an special effects (being range 1 and 2 effects)?

Edit: Not sure what happened, I thought I posted it in the II-31 dream section... It should be moved there