Chief Designer Masashi Tsuboyama wrote:In the game they are enemies, but I think of them as waste (resembling pieces of meat) that could have been conceived from the time that the ambiguous consciousness and memories within me took form, which then evolved within the environment of their existence. Let's say there's a lump of clay and a castle was built from it. The excess clay lumps from that time are the creatures. As biological entities with an ecotype adapted to the environment that the killer created, they are not an existence which possess malicious intent toward the main character. The creatures have gender and wisdom, and the natural capability to reproduce. The direction was also in order to give reality in their existence rather than visuals.
Source: http://www.konami.jp/gs/game/sh4/08roomq.html (Japanese)
Masashi Tsuboyama is credited as the art director and monster designer of Silent Hill 4. He shared the responsibility of monster design with Masaya Okada and Jun Inoue. Tsuboyama is also credited as the director of Silent Hill 2.
I thought I'd share this particular comment because it gives a different perspective on how the creatures came to be. Tsuboyama's comment alludes to the idea that Silent Hill 4's monsters are artifacts of what's left over from one's consciousness and memories and probably had no form initially until they started evolving in order to adapt to its natural habitat. In that sense, they are closer to a life form than a product of delusion.
Assuming that the Otherworld in Silent Hill 4 was created after Walter performed the Holy Assumption, I find myself asking what it would have looked like at the time. What we see through Henry's eyes is the state of the Otherworld 10 years later.