As one fan said, "James is Travis is Alex is Murphy" concerning the idea that SH2 brought to the table that the town is sentient and picks and chooses who comes to the town.. and the guilt. Always characters with a sin to repent for; a past.
I don't quickly acknowledge the love I had for the first game where a man was simply looking for his daughter in a town that just so happened to be the playground of a hell-spawn, but the truth is the fear factor of SH only needs psychological horror to stay true to itself and please fans. Not guilt as is so widely accepted to be the case (i.e. SH2, Homecoming and Silent Hill Downpour). Which brought me to this plot idea:
Think of the Grant Morrison penned 'Arkham Asylum' which inspired the video game in which Batman gets more or less diagnosed as "insane" by all the villains he incarcerated and treated with violence while his mind gets pecked away at by the Asylum's raw ambiance.
With the same commitment Downpour had to Rain, the next installment needs to be committed to breaking a strong character/player's will and psyche. A battle of the mind in the flesh would lend to some absolutely mind bending experiences.
It would easily be the most psychedelic video game experience, probably ever. As Bill Murry said in Ghostbusters 2
"Up is down, down is up; cats and dogs living together!.."
Fear and anxiety and paranoia would all get in it on in some cryptic macabre that passed on cheap "rattling cages" scare tactics for utter lunacy as the town and the demon that is god there pulls out all the stops to own this soul as it has become extremely enraged by the protagonist's defiance and desire to not be easily broken. Maybe substituting guilt for denial, but that's just a side thought.
An alternative plot that would still be better than SH3-SH8 would be someone beefing up in some vain attempt to dominate the town and more or less exercise the demon that the cult initially summoned or freed in SH1,
putting for once the town itself on the defense and the protagonist on the offense. Since there are few happy endings in quality horror stories, 4 out of 6 alternate endings could involve the man failing (if he wins, no more SH games) leaving a happy ending and a dog/ufo ending.
I'm finishing Red Dead Redemption and it's a bummer to know
Max Payne had one psychedelic stage in each game and downpour had hallways that would stretch forever, but we've never had a fully trippy psychedelic video game where no laws of physics or reality apply.
A third plot could be:
Stephen King's Desperation / Regulators which inspired SH1 could even be used where all the character's of the franchise live once more in an alternate reality taking different roles and such (i.e. Married in SH2, but now siblings instead or bad guy in Homecoming, but now a hero).
The last thing I want to say is that I do believe the monsters should stay representations of the undesirable qualities of the protagonist or main character. I just don't believe they should be limited to either being staples (i.e. Nurses) or manifestations of guilty conscience (i.e. Nurses, in SH2 at least).
Especially if they went either way with the "Man V.S. Devil" theme, where the town would really try and break the hero by manifesting the worst parts of himself to break his will- regardless of if the main character is on the defense or offense in the story.