Let me be honest, it's really impossible to do a "good" horror game in the current enviroment because fear is by it's nature a negative emotion. To inspire it you basically need to shock and disturb the audience, and anything that genuinely shocks and disturbs the audience today is being targeted by censors, and simply put the video game industry is not doing it's part to fight back.
Part of the problem with things like horror games is that they are also directed at horror fans, who by their very nature tend to be jaded, and it takes more and more to get the same reactions out of them.
Detailed depictions of things like rape are taboo though they are quite horrific. Part of the problem is that in a lot of horror they gloss over such things if they were even going on so the impact is lessened. You don't see anything so "meh". If you did see something you'd have censors all over it and frankly the industry isn't willing to defend itself. Replace "rape" with pretty much anything that isn't purely atmospheric, or pretty much a jump out scare and the same arguement applies. As a result you see little in the way of actual horror games, and increasingly less in the way of horror movies. Really "Saw" is the only "real" Horror franchise out there right now for movies (which aren't quite as far gone as games when it comes to content as Hollywood fights somewhat) IMO, and that is getting beaten to death. Come Halloween we're up to like what? Saw VI. It's losing it's impact.
Dead Space was actually pretty good within the allowable grounds, and they put a LOT of work into the setting and general atmosphere as demonstrated by things like the "No Known Survivors" site. Of course some of the writing was truely awful despite this. I'm thinking of what happened with a certain military ship, the "magic" cash for uber-weapons/suit upgrades terminals (which were never used by the crew), and other things. Still it had a few creepy ideas, and the twist at the end with Issac's girlfriend was interesting.
It was an okay hybrid of Event Horizon, Supernova, and Aliens.
In the end, what did you expect though?
To put things into perspective 99% of the horror books out there that are actually scary feature things that would give the so called "Moral Majority" and it's ESRB lapdogs conniptions if they were to be shown. Heck even going back to Lovecraft, you've got all of these monsters from "beyond space" raping women and such (Lovecraft allegedly had some serious issues with women) it's one thing to make it clear what is going on in a book by writing around the details, but in a movie to do it 'right' you'd have to show it... and frankly Lovecraft is tame. There are some writers out there like Edward Lee (arguably the father of what people call "Splatterpunk") whose writings could make some good movies but would have people screaming bloody murder and clamouring for X and AO ratings.
To paraphrase Yahtzee, there are no Horror Games, just action games with pretensions. Consider also that the genere is moving backwards as well. For example one of the big deals with some gamers is how all of a sudden nowadays you can't kill children. Yet in Fallout 2 you could do this (and that wasn't even a horror game). The evil dead children from Silent Hill also seem to be missing in the latest iterations and that was one of the more unnerving things that they had. I won't even get into games like "Sweet Home" (which was translated into English from Japanese, sadly I can't find the fan ROM anymore for some reason) let's just say it features a scene of Infanticide.
So really, as disappointed as a lot of people were, Dead Space is as good as it's likely to get for a while. Notice that franchises like Silent Hill and Resident Evil are losing it as well and also becoming more action games. I suspect this isn't just the writers, but also societal pressures. For all the arguements I've entered into defending Resident Evil 5 on racial grounds, it has also struck me as ironic that the game has gotten so far away from it's horror roots that it's more contreversial for that, than the actual horror content which is the part that's supposed to shock people. The original Resident Evil was like "OMG, look at that zombie eating the guy... it's getting back up.. arggghhh!" and it got attention because that was new and shocking. It was a horror game for that reason. But after a while it decided to move away from shocking people, and really I suspect the new monsters starting with RE IV are to get away from the eating scenes and such as much as anything. You just don't see the same levels of nasty despite the atmosphere.
Enough rambling, I'm moving well away from the point. The point of this (which could be it's own thread) is that yeah... Dead Space is not as scary as the hype. But in the end all "horror" games are going to be touted as amazingly scary and shocking, but in the end they won't deliver because the industry doesn't have the guts to deliver that kind of content. Rather than creating new and increasingly scarier horror games to satisfy an increasingly jaded fanbase, they are actually backpedaling and are afraid to even do the things that were done in the past.