Because of this...
Can you imagine how that would've played out? Walter thinking she was Olivia and that she just started hitting on him (after she knew her when she was only 3 years old) and they did stuff and then realized she wasn't Olivia and then Olivia came back and continued to have a father-daughter relationship? noooo ))
I had to write this to get the images out of my head and hopefully forget them )
Still, remember all the lines from "Entrada": "She tricked my son with her carnal manipulations and he fell right into her vagenda. Like mata hari using her feminine wiles to accomplish her evil ends. And I too fell prey. She used my stomach to get through to my heart."
So here Walter said, after comparing her to Mata Hari, that he too fell prey, using his stomach. Of course, he was talking about the food in his case, while at first he was referring to Altlivia seducing Peter, but I think that in Walter's eyes, what she did to Peter can be compared to what she did to him (it's the same thing in Walter's book): she tricked him, she seduced him (as in being all charming and fun) while offering him great food (and we know how much Walter likes food, he even has dreams with eggs playing important roles ).
The only reason they changed the "he" with the "I" was because Peter wasn't there, so it would've been weird to mention him in a history that he wasn't part of.