Crushed walnut will probably kill your dragon, if it's ingested.
However, it's my understanding that lizard litter is ground, not crushed. It is no more sharp-edged than play sand, it's just a little larger grained.
I personally have 3 dragons that have been kept on ESU's Lizard Litter for a couple of months now, and have also kept iguanas on it, all without any problems.
The second thing I believe Reiko is correct on is that crushed or ground, walnut shell is not appropriate for dragons under 10 inches in length. But then neither is play sand.
Just my opinion, and worth exactly what you've paid for it.
D.A.