According to Peter Vecsey, Walsh might step down in the immediate future because of health concerns and because he failed to deliver LeBron James. That's the article in a nutshell.
On the one hand, I really hope Walsh doesn't blame himself for this, and I hope Dolan doesn't hold this against him. On the other hand, Kevin Pritchard is a well respected GM, who was recently fired from the Blazers. Hopefully we can find out more on this story in the next few days.
Get well Donnie.