It is chilling, the speculation and wonder about what was really happening is finally realized. Mrs. Schachter had disturbed the train care with what appeared to be ravings from a hellish scenario to come. And finally here it was, the unknown reality, becoming a known and nightmarish hell.
The "inward eye" refers to the mind recalling an image. He's saying that while he lays on his couch he sees the daffodils in his mind; using his memory of what he had seen.
