Wilfred/WMG

Wilfred is a Pooka
Like Harvey Wilfred is a pooka manipulating Ryan's perceptions. The show has a single name title, Ryan is the only that can see him, Wilfred is manipulative almost like a Trickster. He is screwing with Ryan's sanity and it would also explain why no one notices his undoglike behavior.

Ryan has multiple personalities
Wilfred is just Ryan's inner voice that came out from the psychological stress of either his suicide attempt or its failure. He latched onto the idea of Wilfred either because it runs in his family (re: his mother) or, in light of his life, a way to manifest someone to help him get the girl and assert himself. Anyone else that can see Wilfred is most likely another facet of his personalities.

Ryan is in a coma (U.S. version)
The pills weren't sugar pills; they were real, and Ryan overdosed. Everything thereafter occurs within a comatose dream.

The reason that Ryan backpedaled into his old ways was that he was still bitter over last episode.
Not so much that he's seem what he can get when he throws his weight around, more that he has seen what happened when he doesn't get his way, like moving out to Italy with Whatsherface. His conscience was holding him back from moving away, and once he's past that, he's out not so much for revenge, but for control. Control that was robbed from him throughout the season.