In short, I think it does increase both meatballs and pitches outside the zone.
From what I have gathered from things like slider descriptions and Brian's old posts and such, the way I currently guess and understand the Pitcher Control/Consistency sliders goes like this.
First of all, you should look at the attached pitch location chart when Lester was throwing all his pitches aiming down the middle. You are looking from the view of catcher. You can see the distribution of pitches roughly forms a slanted oval. Since Lester is a lefty with a three-quarter delivery, when he releases his pitch a bit early, it tends to go upper right corner, and when he releases a bit late, it tends to go toward lower left corner.
Now, it's clearer to draw this than explain in words, so in the bottom figure I reproduced a kind of pitch location chart but for the case the pitcher was aiming outside low on the black, i.e., the center of the ovals.
There are three ovals for three different Pitcher Control settings: blue for high, green for default, red for low slider value for Pitcher Control. The size of oval roughly indicates how much pitch location can vary, if a pitcher actually tries to locate a pitch at the center of oval. We notice that the about half of the oval is in the strike zone in each case, despite the widely different sizes.
Looking at the figure, we see that by lowering Pitcher Control the oval gets so large that a significant portion of it lies close to the deepest part of the strike zone. This is probably why lowering Pitcher Control increases the number of meatballs. (The slider description recommends lowering Contact when Pitcher Control is lowered, likely because there will be too many meatballs caused this way.)
We also see that changing the Pitcher Control oval does not change the natural strike % of pitchers all that much (for pitches on the black anyways), because about the same proportion of area within an oval stays in and outside the strike zone, regardless of the oval size. This is probably why Pitcher Control does not have as large an effect on the amount of walks induced by its adjustment.
I also drew a bunch of yellow heart marks. Those are examples of pitch locations when the pitcher totally misses his spot, far from the intended spot (outside low). While the vast majority of pitches go within the oval, some miss wide like this and result in things like wild pitches and hit-by-pitches, etc. How often a pitcher misses wide this way is controlled by the Pitcher Consistency slider. Since errant pitches like this are more likely to miss far off the strike zone, this is likely why Pitcher Consistency is the most effective slider for increasing the number of walks.