Thief 3 had FAR superior horror when you first encounter the Tree Huggers (was it druids?) (which is just plain freaky) or when the silly witch-monster hunts you through the streets. Yes, the Cradle was certainly one of the most impressive displays on how to create mood in a level, but was that Horror? It was scary no doubt, but your survival depended on your skills and it was fun, and not on an arbitrary gameplay gimmick.
You actually proved my point though (albeit i suck at expressing it.. as always ;p)
Thief 3 was Creepy in parts (sneaking through the Druid dens was to me vastly creepier than the Cradle though) but never once put you in an unwinnable fight (or if it did, you got into it because you were just plain careless), or forced you doing things are certain way (like "never look at your enemies") Good Horror does not make good horror by making enemies immortal (if i wanted that, i can just crank the difficulty in games like Oblivion or Fallout 3 to the max). But i admit that example is bad, as the Witch "thing" in Thief 3 is immortal .... for a while.
What i mean to say is anyway, that it does not break the atmosphere when there is good combat, in Thief 3 you were PERFECTLY ABLE to kill and murder in stealth the entire household, but as soon as it got into the open you were vastly outmatched and usually had to retreat. This meant that every attack vector had to be carefully planned and scouted, patrol routes etc. (Which was great fun for the sneaky minded assassins ;p)
And yes, the "being chased through the mazes" sequence in DS was scarier than most.
But i guess you are right, this kind of Survival Horror isn't my thing, i don't really "have fun" blasting stuff away more than usual, but i like being given the ability to *win*
That said, i will give you Kudos for mentioning Thief 3 because not only the Cradle was scary in that, a vastly underrated game, imo