Nope, I didn't find it scary. And to be blunt, it was sometimes unwittingly hilarious. For example, I would know that a monster appeared because I heard that supposedly "surprise!" sound. The monster, however, wouldn't be there yet. Any kind of suspense, terminated.
Personally, I think that the best horror is the subtle, mindfucking one. But, Dead Space was neither.
Edit: Hm, I already suggested above that a bit of subtle mindfuckery would work, but let me give an idea. How about leading the player to a monster without any kind of fanfare and without any kind of lighting? As the player tries to restore the lights to the place or find some lighting equipment, the monster attacks him/her every once in a while and the player will have no idea where it came from and will either run like a scared little girl or shoot the shit out of everything like he/she is Rambo or sth. And then, just like Rambo, he runs out of ammo! Oops!
Personally, I think that the best horror is the subtle, mindfucking one. But, Dead Space was neither.
Edit: Hm, I already suggested above that a bit of subtle mindfuckery would work, but let me give an idea. How about leading the player to a monster without any kind of fanfare and without any kind of lighting? As the player tries to restore the lights to the place or find some lighting equipment, the monster attacks him/her every once in a while and the player will have no idea where it came from and will either run like a scared little girl or shoot the shit out of everything like he/she is Rambo or sth. And then, just like Rambo, he runs out of ammo! Oops!