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Deliberately "broken" controls, slowly building storylines, being outmatched by almost every enemy ... all add to a scary survival-horror experience ... but that's not what a mass audience wants nowadays.
For example - The average gamer would find the "broken" controls of the older Silent Hills frustrating, and would likely give up on the games. ut it is hard to think of a way to replace "broken" controls with something as equally effective.
Developers have improved survival-horrors one big problem: The gameplay. But in doing so, they seem to have exchanged it for "true" scares, creepy plot, atmosphere, and all-round eeriness. Those things come first in a survival-horror game, always.
But yeah, all that's really left are Silent Hill, Fatal Frame, hopefully Parasite Eve: Third Birthday for PSP, and Dead Space (superb game, imo). Resident Evil has become more like say...Dead Rising, just a matter of shooting zombies, more of an action game than survival horror. And now they bring in Co-Op...ugh.
...oops...
However with that said horror in itself isn't dead like Chaut stated.