You are exactly right with leaving the terror to the mind. And it is exactly why I love these shows so much (especially at night). I recently saw the Strangers and can tell you the best part of the movie was the times they scared you without showing anything or minimal, such as the figure standing in the shadows just watching Liv Tyler (reminded me of Hitchcock). Also as soon as the gore entered the movie (there wasn't much), I immediately thought that is what's wrong with "horror" today.
One of the best parts of the Blair Witch, I thought, was when they thought they heard a baby and you could faintly hear some crying. That stirs up all kinds of images and keeps stirring them up even after you are home safe in your bed. If you want blood and gore just watch the medical channel on cable. If you want great terror, keep listening to OTR.