Somehow, I don't think Herriman expelled Wally considering when Bloo pulled the same prank during the house photo, he wasn't.
However, unlike Bloo, Wally most likely didn't have an arrangement with Madame Foster.
My theory is that Wally got adopted just before the house picture the year after the "mystery picture" which made everyone worry that it was part of Wally's scheme to ruin the house picture that year. When nothing happened, everyone assumed that Wally had been truely adopted and that was that until the first house picture after Bloo started living at Foster's.
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