I see it as somewhere between catskin's and megasam's interpretation.
I think it is more than just the imagination of the child - it's too clearly described and the imagery is not childlike. However I don't really see the indication that the child is seeing death. I believe the child is seeing a reality that adults can't see or believe in. The last three lines describe how the child will see the sword-wielding figure again, but not for some time, not until s/he has spent 'some time downstairs' - a euphemism for becoming an adult who can no longer see such things. Perhaps the child will see him again after passing from this world.
I see it as somewhere between catskin's and megasam's interpretation.
I think it is more than just the imagination of the child - it's too clearly described and the imagery is not childlike. However I don't really see the indication that the child is seeing death. I believe the child is seeing a reality that adults can't see or believe in. The last three lines describe how the child will see the sword-wielding figure again, but not for some time, not until s/he has spent 'some time downstairs' - a euphemism for becoming an adult who can no longer see such things. Perhaps the child will see him again after passing from this world.