This is a lengthier write-up / borderline rambling.
I just replayed SH3, this time on Hard for both Combat and Riddle, and, it just so happened, that both my first playthrough years back and this second one took place almost exclusively in the middle of the night. I think that is the best time of day to play this game because of how weird it feels to stay awake in the middle of the night and how well it compliments the dream-like feel of the game itself.
First things first, this is probably the prettiest characters looked on the PS2 and what's more, Konami achieved it in the first part of the console's lifespan whereas most of the time consoles realize their tech potential closer to the end of the gen. Absolutely stunning cutscenes where characters move beautifully with the help of mo-cap. A massive, almost generational step forward compared to SH2 and with no FMVs, all in-game. Truly, the production value is showing here even playing the game 21(!) years later.
The Otherworld features some really trippy and disturbing imagery, it's definitely the scaries SH game, even replaying it, the game is super creepy and very opressive. The soundscape is just as visceral. With headphones it's often hair-raising.
STORY SPOILERS
The characters are mostly good and their limited number really benefits the story. Heather is a very good protagonist and she actually feels like a character, whereas Harry and James feel more like extensions of the player and are almost like silent protagonists. She is angry, sad, scared, annoyed, something that James and Harry rarely are if ever. Of course that had its purpose, but making this change for the third game was a great decision.
Douglas is fine, he opens up towards the end.
Vincent is amazing, his voice, mannerisms, weird facial quirks are fun to observe and until the very end he retains an aura of someone who you can't really trust and his intentions are never really clear. He combines this feel where you don't really know if the character is making a weird face or it's just the quirks of early mo-cap technology. I think it's mostly the former, but regardless, the end result works, really impressive. A character who is fun to watch every time he's on the screen.
Claudia is... interesting. On one hand she acts as a crazy person with no other angle or dimension, just a cultist and every time she and Heather meet she keeps repeating herself. On the other, there's a certain angle to the character that is left very vague. At the end, before the big boss battle Vincent confronts her and claims that she is the source of what's happening.
I don't know what to think of this. Obviously the monsters and the Otherworld in SH3 are created by Heather's subconcious as the God is growing within her. Maybe Vincent meant something else. Claudia was also abused as a child and was perhaps projecting her suffering. I'm digging too deep here and regardless, you're not supposed to take it all literally and overanalyze it in case of Silent Hill. Still, Claudia is at the very least interesting because her abilities aren't really clear. She seems like a normal human being who is simply in touch with Heather's Otherworld and the God. On the other hand, when Douglas corners her and aims a gun at her, the screen fades out and then later you find Douglas with a broken leg. Very ambiguous.
There's also Leonard and an another minor character, but they appear so briefly, there's very little to say.
The enemies are not that impressive: after SH2 featuring monsters that thematically represented a certain aspect of characters' psyche, like the Nurses, Pyramid Head, Abstract Daddy and others, here they just feel like scary guys. And it works, they are scary, but a certain thematic aspect was lost.
I think the plot itself isn't particularly great, but it is very well directed and scripted. I like the fact that the lore of the first game was combined with a much more psychological aspect of the second title. You can't really say for sure if all of what is happening is real or imaginary. On the other hand there's not much in the way of new lore nor is there a proper resolution at the end.
Gameplay has evolved considerably as the combat was improved. Hard difficulty is actually quite hard and requires you to conserve ammo and mostly avoid enemies instead of fighting them. Bosses are tough on hard, but the last one is almost impossible without exploits. Riddles are just mind boggling, "cryptic" doesn't really describe that properly. More like 90s classic quest games-tier. Bradygames is required reading here.
The music is what really elevates the game from "good" or even "very good" to "Amazing". This is Yamaoka's best work out of the four 4 SH games. The compositions that I like the most are the ones playing during cutscenes where Heather talks to other characters. They give this feel of a very dangerous, dark place, but also a dream-like state. They definitely enhance the story and also can be listened to separately. Just an amazing soundtrack to accompany a great game.
Like DirtyMidnighter said in his review, this is truly the last Survival Horror game before both SH and RE went in a different direction. SH3 definitely feels like an author-driven game, there was no commitee involved here: It is weird, it feels very expensive, almost pushing into the 7th generation territory, it focuses on themes that are not very marketable or even compatible with video games yet it pulls it all off very well. I know it's platitude nowadays, but they really can't make a game like that today.