There are two narrative schemes going on in Ethan Frome. In the Prologue and Epilogue the narrator speaks in the first-person. He is a peripheral narrator because he is not telling his own story. Rather, he is on the edge (i.e., the periphery) of Ethan's story. He is so much on the periphery that he prefers to remain anonymous. We never learn his name, age, or other biographical information. But, he does give us one crucial bit of information – his occupation. He's an engineer. What a coincidence. That's just what Ethan has always wanted to be. Wharton could have dreamed up any number of reasons for the narrator to be in Starkfield. By making his excuse an engineering project, he becomes Ethan's alternative "successful" self, the kind of man Ethan could have been if his life had turned out differently.
Likewise, the narrator is drawn to Ethan because Ethan is what he might have been if he had made different choices or had been raised in different circumstances. For all we know, the narrator was born and raised in a town exactly like Starkfield, in poverty, and easily could have turned out like Ethan.
Now for the second narrative scheme. In Chapters 1 through Chapter 9 the narrator drops out of the story completely (since he wasn't around 24 years ago), and switches over to the third-person. At the very end of the Prologue, the narrator says, "I found the clue to Ethan Frome, and began to piece together this vision of his story." So the narrator is still telling the story, he just moves from peripheral status to marginal status. He literally exists only in the margins of the text.
As a third person narrator he's unreliable for several reasons. First of all, he doesn't ponder what Zeena or Mattie think or feel, but only how they might have appeared to Ethan in the past, and Ethan is definitely biased in favor of Mattie. Also, the narrator has already told us (in the Prologue) that his "vision" of Ethan's story is a combination his imagination and of each townsperson's "different" story (Prologue.65.; Prologue.1), which may or may not be accurate. Since none of these townspeople could have seen most of the events, they can't be considered reliable sources of information.