Normally, I would have to pretty much concur with your assessment of this name origin. I have not found it in either my Irish or English resources.
So,if it is from Welch, or Walsh or Welsh than it derives from the Germanic term for "foreigner" ...however...
My suspicion is that it is from another term that I can only find in a compilation of resources ...though rather a guess ...I fine "Whel-" names often mean 'dweller' and of course "hel" could be related to "dhal" or "dale" or "thale", etc. (depending on how liberally you define it).
Therefore, my guess is a "dweller in the valley" ...and I bet I'm right ...just from the normal evolution of the names ...can anyone do me better?