There's a difference between geniune horror and just being plain disturbing (like, Amnesia: Dark Descent compared to Return to Last Save Point). I might try Undying if it's more on the horror side. Knights in the Nightmare actually looks decent. Call of Cthulhu--how easily modded is it? I'm pretty sure someone could mod some bugfixes in.
I'm gonna risk recommending a game everyone knows about, and say:
CAVE STORY
I think it's already been posted in the indie games section, but I'm gonna put it here anyway because it deserves the attention. It's a side-scrolling platformer on the surface, but the story and characters underneath it are just awesome. A very charming, very well-done game.





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