It was new technology, 3D was a fairly new concept in gaming in the mid 90s. But it took so long to get properly implemented. You have super mario 64, gex enter the gecko, lemmings 3D. I am wondering if it was a business decision and not the devs who pushed for a free roaming camera, since it was clearly not a satisfactory result gameplay wise. Because at the same era, you have games with fixed camera angles that are much better experiences overall.
That sounds exactly like Amnesia. There are no HUD elements, health is buried in your inventory. Sanity is displayed by obscured vision and hallucinations. The only real options you have to beat a creature that spots you is to hide and hope it didn't see which way you went. It's quite slow paced and reading/listening to the notes provides the narrative along with puzzle hints. There are no weapons, but by being clever you can avoid a monster or block a door long enough to escape. It is rather "western" styled though, but more along the lines of HP Lovecraft than a Hollywood zombie movie or Deadspace for example. There are some jumpscares but they are absolutely terrifying only because of what lurks around the corner, a creature you hope to never get a good look at. I do recommend it.