I'm astounded the developers have not fixed or even acknowledged this issue. Some people have gotten around it by playing in Windows 98 Compatibility Mode. For others (like me), this setting had no effect. The only way I was able to beat the game was to lock-on with the submachine gun (this moves York's aim to a general, lowered position). Afterwards, aim as close as possible in the doll's direction, and just spray and pray. You will eventually get a shot in, allowing you to finish the game.
There are boxes that absolutely cannot be shot at with this limited aiming bug on PC, but at least the game is beatable.
Thanks for your tips,I changed to win98 mode and everything is fine, i can move the aim freely. just finish the game,it's great!