After rewatching this epiosde last night, I think Walt's "they're pretending" comment is referring to the whole Others village.
They probably have it pretty cushy somewhere but built this rustic village, don tattered clothes, and apply fake beards for some ulterior motive - maybe to give the impression that they're less formidable.
On that formidable note, we know the Other's have at least 8 guns - the rifle and the pistol they took off Mike, the five they took off the posse that went after Mike, and at least one when they shot Sawyer on the raft.
I'm not sure I'd want to go after them on their turf with at best a 11-8 gun advantage.