I have scared people in quake III arena and jk-jedi academy games...
Someone told me my darkness mod made them embarrased because they ... manured in their pants.
Heres some ideas -
Starts off - You fight of some thugs, easy stuff, then later in the level, you walk into an ally, where you find three. They have alot of health, so when you hit one... next thing the screen blacks out for about 5 secs, while you hear screams, scratches, clothes ripped, splat and tear sounds.
And then when the screen unblanks, the ally is completely destroyed, and the thugs are suddenly missing various limbs, hanging upside down on hooks, with hellish signs of cuts all over their bodies.
Then when you get out of the ally, the lighting suddenly turns red (done with triggers, large light 10 layers up is white at first, but when you hit the trigger going out the ally, it turns red)
Then you walk into a meat shop, and you find a corpse of a butcher, then its yellow light turns red. Next thing you know, (Make a model or skin), another butcher has been mutated and runs at you with a bloody butcherknife
That would make just about anyone start screaming, and never turn their lights on again. After doing something like that, you can come up with more =-)
(Oh, and in the "Destroyed" areas, always add lots and lots of blood splats)...
Does that sound horror enough for you?
Now you can't call colors violent can you?