I concur with meraxes; protectionism -- whether on a national or local level -- does not work. If the small shop can't offer something (convenience, quality, service, atmosphere etc) that the national chain does not, then no amount of encouragement or pleading to "buy local" will work. And if you were running a small business, do you really want your customer base to be built on pity and parochialism?
I.e. if you're going to zap Walmart, it doesn't make much sense to decry the fact that they are a large, efficient, national chain. I'm reasonably certain there are other grounds to criticize them.
In this context, they offer a poor selection and have minimal expertise in selling books, and the price war is a PR stunt that isn't likely to do much except squeeze everyone's margins a little bit. Amazon's balance sheet is, afaik, strong enough that they may not like it but can definitely survive it. Plus, a good piece of Amazon's business is supposedly in the "long tail," not a field in which Walmart has a reputation (or is likely to develop any time soon). So I doubt there will be much in the way of long-term effects from this little price war.