The chase camera script was not designed to work with the default movement template. All you need to do is assign the chase_camera action to your model in WED under properties for the model.

You will have to edit the script to put in the correct start and stop frames of your walking animation. Right now it cycles between frames 2 and 30 and goes to frame 1 when the model is not moveing.

Remember the script is very incomplete. You will have to add more code for running, jumping, etc., as well as, adjusting for the floor height.