Well...I found SH1 to be more horror, while SH2 was more of a thriller. SH1 was more raw, dirty, through the depths of hell kind of style. SH2 was more personal (it was more about inner demons, so to speak) and thoughtful. But SH2 did have some scary areas. But the whole Silent Hill concept felt more fresh with SH1...so maybe that's why SH2 had less of an impact on me from a horror point of view.
And yeah, SH1 is still my favorite SH game.