The BWP could almost be a new genre, interactive horror. The most common thing I hear by people who were frightened by it, is that they were scared by the reality of it, either thinking it was actually found footage, or believing in the mythos that surrounded the story. And that's actually why I like it, it's operating on levels beyond what you see on the screen, the movie was one part of a larger "project" for lack of a better word, which involved the advertising, the story of three kids getting lost, and the invention of the Blair Witch as a rural legend, all of which made lots of money at a very low cost. I admire the ambition behind that.
I might even call it a descendant of William Castle's work (skeletons on wires in the theater, buzzers on the seats, life insurance being sold in the lobby, etc)