First off, does your collection of cool Tshirts never end?
Horror tends to be subjective, but I think a lot of people would agree that demons and spirits that can't be physically fought against are scarier than something that can be killed. Those are some of the scariest movies to me, the ones that deal with possession and ghosts. You mentioned The Conjuring, and that was a fantastic ghost/demon movie. One of the areas where I feel horror movies can stumble is have the ghost turn out to be just misunderstood, and the Conjuring ultimately avoided that by having something just pure EVIL.
For Neverending Nightmares, I think one of the things you can do to make the horror more effective is continue to do what it looks like you're already doing, from what I've seen so far; make the horror really visceral, as opposed to just gratuitous. That short segment from the Kickstarter launch video where the character is peeling the veins out of their arm and digging into the skin, then wrenching a bone out with a pipe makes me cringe so hard every time I see it, because there is something personal and relateable about that. It makes my arm have phantom pangs of sympathy. In a movie where someone gets their head chopped of or sometimes even gets stabbed, you really can't relate to it; but when you see someone's toenail or fingernail get torn off, or one of the worst for me, see them get their Achilles tendon sliced, you
feel it and can imagine the pain. Everyone has stubbed their toe against a door frame in the cold, but not everyone has been shot or stabbed, even though getting shot or stabbed is probably way more painful
Apart from the details like that, I think a more general way to amp up the horror is to try to recreate that feeling of helplessness you get in a nightmare. I think this was discussed some already, but limiting the character's movement and making it so they have difficulty doing things that shouldn't be that hard, like turning on a light or opening a door, and running from something that is chasing them (this is where the limited run mechanic could really shine). Some of the most terryifing moments in horror games I've played have been where they recreate that feeling of being chased, Outlast and Amnesia: Dark Descent did it really well.