The body on the fountain in back hall

[Frost]

I think it's just there to give the player an "ehh ew wtf?" feeling. I've never had it appear and disappear like you've described, but I didn't spend much time in the back hall after seeing the body. Since it disappears/reappears like that, it's also probably Daniel's insanity messing with him/you.
It's been a while since I last played, but isn't the body also accompanied by the Shadow goop? The Shadow kills anything/anybody in its way.