Well RAW it says that you assume the template, which happens to have a +4 level adjustment. It never, ever, ever, ever mentions changing the template to not have a template.
RAW it does not say that you assume the template. It says that you MAY assume the template with other requisites and the assistance of a Dry Litch. Similarly, any humanoid may assume a Lycanthropy template with the assistance of a natural lycanthrope. They still have to pay the level adjustment though. They have just met the prerequisites. That is the difference between Walker in the Waste and the transformational classes cited like Dragon Disciple.
And yes, there are a couple of dead spellcasting levels. But the class has some special abilities that it gets. Does this make up for lost caster levels? Probably not. Does this put it in the range of other prestige classes in terms of balance? Probably. Is it more balanced than adding a 4 level template to the class for free? Certainly.