Very well written text. I love Horror games too, and I feel like the newer "Survival Horrors" have been letting us down, because they lost the focus when it comes to make you "fear the unknown".
For instance, my all time favorite Horror game was the classic Clock Tower, because it's a game that really makes you feel helpless. There are no guns, no way to beat the enemies. All you can do is run and make some diversions. Some may feel frustrated by playing it, because they're not looking for the fear. They just want some ugly guys to show up, and some guns to take them down. I like it when the game buils an atmosphere that can make you identify yourself with the character you're playing with. If you have a character that is too heroic or idealized, you can't really get into the game and... be afraid at all. That's my opinion for Horror Games.
As I've said, Clock Tower WAS my favorite Horror game. Until Siren came up, for the PS2, and later Siren 2 (PS2 also) and Siren: Blood Curse (westernized remake of the first one for the PS3). For me, Siren is the absolute definition of what a true Horror game can be. Creepy atmosphere; very REAL and HUMAN playable characters (they all die in one shot or two... yeah, you die a lot in this game). Clever gameplay with puzzles that always involve strategic ways of dealing with undefeatable enemies or just passing through them without dying; Scary, intelligent and IMMORTAL enemies; and last but not least: Intense, compelling, and VERY complex storytelling. You're constantly mindfucked while playing it, you can't just sit and watch the game, you really have to work the timeline on your mind in order to truly understand the cause of everything. You feel like the characters you control: lost in a mess of supernatural events. If you just play the game and don't really try hard to understand the plot, you'll end up just like them: you'll just know the tip of the iceberg. However, if you read and organize all the archives on your mind, if you try to see the link navigator in a chronologic order, you'll have a better understanding of what really happenned there. The game doesn't give you everything for free, you can finish it without understand anything, but you can go ahead and try to figure the "puzzle" that is the storyline and it's very satisfacting when you start understanding the truth behind the horror.
This game doesn't get very good reviews, because it's not exactly an easy game to get into. You really have to put some effort in order to get sucked into the game. But when you do, you'll realize how underappreciated this masterpiece is. Hell, I found this game on a bargain bin on some retail store and I thought it was some underground bad game. But it's really an EXCELENT game. But, as you said, and more than any game, it needs you to want to be sucked into the game.