Well, the theory of this identity being Riddle has been jossed by Eliezer.

And you're right, I was thinking in terms of Riddle manipulating this other person into being Voldemort's nemesis since the start of his Hogwarts education (given how apparently magically talented this person was) but now after reading what you wrote I realize there is no information regarding this person's magical talent or political alignment while he was attending Hogwarts.

"Born 1927, entered Hogwarts in 1938, sorted into Slytherin, graduated 1945. Went on a graduation tour abroad and disappeared while visiting Albania. Presumed dead until 1970, when he returned to magical Britain just as suddenly, without any explanation for the missing twenty-five years. He remained estranged from his family and friends, living in isolation. In 1971, while visiting Diagon Alley, he fended off an attempt by Bellatrix Black to kidnap the daughter of the Minister of Magic, and used the Killing Curse to slay two of the three Death Eaters accompanying her. Beyond this all Britain knows the story; need I continue it?"

So Riddle/Voldemort murders this person when he is travelling after graduation. He assumes his identity in 1970 and gives this person a solitary life so he can manage his time better better between identities, and also to avoid commiting mistakes that would give away his impersonation in front of his family. A year later he jump-starts Britain's wizarding war setting this other identity as a prominent player in the anti-voldemort side in a single move. Beautiful.

I think most of the confusion surrounding this new character stemmed from the assumption that given his importance in the war, he would have an analogous in canon, and Tom Riddle seemed to fit pretty good (or maybe he is a modified canon character, but I can't really think of any).

Now I'm curious about the details of this impersonation. Amelia Bones mentioned that there was no explanation for his absence, so why did they just assume it was him? Surely someone would have tried a Polyfluis Reverso as soon as they saw him, so it's possible there are darker magics involved, which is totally justifiable with Voldemort. But perhaps it's not that uncommon for wizards seeking power to disappear for a few years and then reappear with a better mastery of magic and a more jaded personality. After all, travelling to exotic places is normal for wizards in canon too.