I would play more horror games if more horror games took the Texas Chainsaw Massacre route of gameplay. For those of you who don't know, Texas Chainsaw Massacre was released on the Atari back in 1983 and let you play as Leatherface himself. It was a simple game but I like the idea that you get to play as a serial killer.
The ideal horror game for me would essentially be a mix of Arkham Asylum, Naughty Bear, Manhunt and, Dark Corners of the Earth. You play as a serial killer in either rural, small-town or, the suburbs (or a mall/ shopping center...or a hospital...well, any setting really) and you precede to kill everyone. You're immortal so you can just rush up to people and murder them outright. If you get shot you do the Micheal Myers thing: lay there until everyone turns their back then return to the shadows.
I say add in Dark Corners of the Earth because I think a sanity gauge would be an excellent thing to give to NPCs. Imagine, creatively killing a bunch of NPCs and leaving their bodies in various places. NPC A would find them and slowly go insane until they finally pick up a kitchen knife to defend themselves. You then do the unthinkable: call the police and hide. The police come to find NPC A muttering to him/herself in the closet, covered in blood (assuming you were able to get an earlier victim to fall onto or, bleed on the survivor) and wielding a bloody knife (assuming you used the knife yourself on another NPC). You get away and NPC A gets hauled off unless their sanity has dropped to 0 or lower. That would be when they attack the police and end up getting shot dead.
Shit, I need to add this entire thing to that thread about games you wish they'd make...