Although Monolith missed the mark with Fear, they came close to a bulls-eye with Condemned, a first person title with a focus on close range combat. You could pick up random items lying around to use against an army of insane hobos..
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Unfortunately, this game did nothing for me, mainly for two reasons. First, I really wasn't into the combat. Just constant first-person pipe bashing, with the protagonist occasionally whispering highly inappropriate things like "Take it!". But mainly I think it was the fact that the game just made no sense. There was some kind of cult, and the main character is a special psychic person who has unusual bone and muscle density plus he has visions of some S&M dude with a couple of metal poles as weapons, and what the hell was up with that ending?
The story definitely fell flat from the end of the first game into the second one. I think the writers wrote themselves into a corner with the whole super power thing. Honestly I don't know if the last boss was a real guy or a hallucination by the main character. As that type of enemy doesn't appear in the second game which dealt more with the whole cult aspect.
If you haven't played the second one, even though the story is weirder, you may like the game mechanics more. The combat system was fleshed out to have combos. And there were puzzles built around investigating as oppose to just letting the game do it all for you. However, once again the game falls apart at the end, where the final level plays out like a standard FPS with the player running around shooting everyone.
The highschool level will always have a special place in my heart.
I don't think FEAR or Condemned were failed horror games, they were just a different breed. FEAR had a cool shooter element with some interesting AI, where Condemned basically just played to your fear of being stabbed by junkies, which I think is pretty uncomfortable to most people. Personally I don't go to horror for great Lovecraftian narratives, I go there for cheap, creepy thrills, and that's what both of those games were all about in my opinion.