So what exactly does Kirby do to a G&W trying to wall him?
I got you keep shielding until he runs out of space, then react according, what would the situations be for reacting accordingly?
Well, let's see...
If he goes over you, follow him in the ground and shield when he's about to land, facing him if you can. Once he's close to the ground, if he doesn't attack you or lands behind you, utilt OoS. If he lands in front of you, either grab, bair or ftilt exactly as he lands/hits your shield. If he bairs while landing, hope you followed him well enough so that he's forced to misspace the attack, and ftilt/grab him as soon as the last turtle hit hits your shield. If you're daring and absolutely sure he won't attack while landing, you can also charge a dsmash/fsmash and frametrap him as soon as he lands.
If he tries to go through you, shieldgrab/ftilt/utilt whatever he does. If he tries to grab, either ftilt him away, or move out of his range and retaliate with an ftilt/utilt.
If he jumps offstage just stay on the ground until you see an opening, and bair him as soon as you do so. If he fairs/nairs/bairs and lands, shieldgrab/ftilt/utilt/bair. If he fairs/nairs/bairs and remains offstage and you have time to make it to the ledge, do so because he'll try and grab it. Force him on-stage by taking the ledge away from him, and ledgehop an "invincible" fair as soon as he's above you when he upBs.
If he's grabbing the ledge, then get ready to try to edgehog him. He's not MK, who has theoretically unbeatable planking! You might not be able to hit G&W, but you CAN grab the ledge and force him to miss the sweetspot, thus making him land on-stage and eat a ledgehopped "invincible" fair.
"Invincible" fair, I mean as in when you grab the ledge, you go invincible for a set number of frames. If you jump off before those frames run out, you're still invincible for the remaining frames. You can abuse this by attacking during this moment, usually with a fair or bair depending on your opponent's position, pretty much making you invincible while you start up the chosen attack... Which both aren't slow, either.
Also, while G&W dair might edgeguard kirby well, doesn't he have to be recovering low for that to work?
Yep, we have to be recovering below his maximum jump range for it to work. If we're recovering high (which should be almost always), then don't worry about it as an edgeguard.
If he dairs us offstage, he's forced to recover low. If you evade it, just jump over him and airdodge while landing/bair while landing/upB onto the stage/downB while landing then bair as soon as you transform back/allow him to uair you and just float far into the stage. You could also just get hit by the dair and recover from high at higher-yet-not-killing %s, but consider the safe options before choosing "getting hit", since recovering harmlessly is better than recovering with damage.