The decision to put Pyramid Head in Homecoming was a controversal one. I've heard opinions at every end of the Spectrum: It was awesome, it doesn't make sense, it makes sense but they should come up with something more original, this is proof that it's non-canon, etc. The most common insult is that it was "nothing but fanservice!"
To me, this last complaint is only half right. Was his appearance there to please fans? Yes, I won't deny that. However, it was much more than that. Even though it was fan service, he represented something deeper than people give it credit for.
Throughout the game, we see guilt and anger. Sam, Martin, Margaret, and Alex all succumb not only to the guilt of what they've done but also the anger of the children (for Holloway, it was very much the latter). I believe Pyramid Head (or the Bogeyman) served the same role that Sepulcher, Scarlet, Asphyxia, and Amnion served for Sam, Martin, Margaret, and Alex, but for someone else: Adam Shepherd
Let's look at what we see during the game.
At the beginning of the game, Alex is wheeled into a medical room by his father in a medical outfit. As he's leaving the room, Alex angrily lashes out at him. The last words he says are "Hey, wait. Where are you going? Don't leave me here!"
That's exactly what his father did in real life. Abandoned him for four years in a mental Hospital, just adding to all the neglecting he did growing up. Adam Shepherd barely steps out of the room before his Punisher, the Bogeyman, slices him in two. Alex's desire for revenge manifests itself in the dream.
Another important part of the game is the Shepherd House in the Otherworld. You must solve 4 puzzles to escape and each of the puzzles relate to one of the the members of the family. Your mother, the masks to hide behind. Your father, the medals for horrible deeds. Your brother, Robbie and the clock. However, Alex's puzzle relates to knives. Angela's knife (the same she used to kill her father and the same Angela that never forgave her father), the Butcher Knife (the Butcher, in Origins, representing Inner Rage), and Pyramid Head's blade (the same military type that the Bogeyman has. The same Pyramid Head that punishes people for their sins). It's no coinsidence that these knifes of rage and revenge relate to Alex.
During Alex's final confrontation with his father, Pyramid Head finally appears to finish Adam once and for all, in the same way he did in the dream. In happens once again while Alex is furious. Furious that he believes his father is lying him and never believed he could make it as a soldier (As shown in Alex's diary and his reason for believing he was a soldier). It is also at the same time Adam is confessing his guilt to the point that he accepts his death. It's when both of these happening that Adam is killed, this time for real.
The Bogeyman ending might be the strongest piece of evidence. In this ending, Alex becomes the Bogeyman himself. Let's look at the chioces he must make for this to happen. His mother is hurt beyond healing. There is no saving her. She begs for mercy for him to kill her yet he can't do it. In doing this, Alex never gets to hear her finally say "I love you" and it shows that he never did end up trusting her. The wounds with his mother were never healed.
The case of his father is more obvious. Neither Alex nor Adam realize that the other is there yet their confession and judgements ring true. Choosing not to forgive him for his crime ends with Alex saying something the lines of "You deserve whatever hell awaits you." He never forgives his father.
Alex's refusal to spare a medkit to heal Wheeler shows just how far he has come. His anger and hate are getting the best of him and he's losing his compasion even for his friend. It was the same way with the children in their boss forms. Had they still had their human minds, they might not have attacked their parents/brother and certainly wouldn't have attacked an innocent bystander like Alex. However, in their monstrous forms, their anger puts them beyond reason. The same thing is happening to Alex.
Through all of these decisions, he succumbs to his rage and hate and becomes a monster-just like Joey, Scarlet, Nora, and Josh. It wasn't a concious decision, but his emotions got the best of him.
Like the other bosses, his childhood helped form it. For Joey, it was how he died and his love of gardens. For Scarlet, it was how she died and her love of dolls. For Nora, it was how she died and her love of Alice in Wonderland. For Josh, it was how he died, his spoiled childhood, and his other interests. Alex had his interests too. Josh's drawings constantly reference the Bogeyman and how he'll come after you if you're bad (Probably told to children to explain why a few kids disappear every 50 years). It's clear the Bogeyman was a story told in Alex's household. Alex's want of punishment to his father combined with his interest in the army (part of him wants to make his father proud) created the Bogeyman. This is why the Bogeyman has a giant army knife instead of his blade from 2.
The betrayal Alex felt, the guilt the parents felt, and athe subconscious desire for them to suffer, led to the creation of a punisher. This was not exclusive to Alex in the game at all. Joey became a monster due to this. As did Scarlet. As did Nora. As did Josh (On the surface, he knew it was an accident, but in his deep psyche, he was angry). I think that Pyramid Head was the 5th boss in the game that you never got to fight. Alex's manifestation come to life but able to exist along side Alex because he's still alive.
Could the developers have created a 5th original monster in place of Pyramid Head? Yes. However, it being Pyramid Head still works. He still serves as a punisher, as a representation of the protagonist, and as figure of the town's history. I'm not interested in seeing Pyramid Head in any more of the games, but his appearance in Homecoming was perfectly justified and really had a reason behind it.