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Not a fan of horror games, but I think the problem with both horror and stealth games are that the player characters are becoming too powerful. When the PC's become more powerful than the NPC's, the PC goes from becoming the prey to the predator.

I mean, I'll give an analogy (is that even the right word?). I remembered playing EQ when I was young (and boy did I suck at it), but I thought it was a really interesting experience how some monsters can be terrifying in a sense when you're low level, and when you become a higher level they seem like fodder. It's that same logic. You just lose any sense of fear or suspense if you're more powerful than the object.