What's going on with the fog at Firelink Shrine?
Solution 1:
It is to cut load times when traveling to Firelink Shrine. Since all of the services (leveling up, merchant, blacksmith) are inside of the shrine, the player has to travel back every time they want to do something. Instead of loading the entire area, the game only loads the much smaller interior of the shrine. The fogwalls are there because the outside of the shrine is still loading, and will drop as soon as it's done.