I'm really not going to reply to anyone in particular here, but I will throw in my 2 cents. I'm a big fan of survival horror games in the vein of Silent Hill and Fatal Frame, and I have played through both series with the exception of Fatal Frame 3. With that being said, audio/visuals do play a definite part in the heightening of tension, but why is it then that the original Silent Hill is still the most frightening, and not one of its sequels?
Both Resident Evil 5 and Silent Hill 5 are coming to the high definition consoles, and I have no doubt that they will embrace the available technology; however, the original Silent Hill and Fatal Frame, done on consoles that span two generations back, are still atmospheric enough to provide the goods. Given that the Wii is an upgrade (no matter how slight) of the previous generation, one should not assume that a scary game cannot be done with "inferior" hardware. If Grasshopper can at least provide the same sense of tension that the original provided, with fluid controls, and a slightly upgraded graphical look, then I have absolutely no reason to complain.
Edit: I see that the argument actually went into controls as opposed to graphical prowess, so my post is only slightly relevant then.