Personally I like the evil tooth fairy Idea
But to answer your question, psychological is the way to go. Chop-em-up, cheesy horror movies are not the way to go. Youll be better off actually trying to scare your viewers then gross them out and turn them away. A suspense-filled, twisting and dark plot always works with some evil nutter trying to do something, or evil forces (I like the evil forces).
Example, a town is suddenly locked away from the world by horrible weather. Stormclouds are all that are visible, blah blah blah, a large rain of fire comes down upon the town, a family have to escape the horror, they flee underground where they are pursued by these strange creatures that are...well...massively evil!!!!! (to save some money and create more suspense, only show parts of the monsters. They can come from large tentacles to claws to red eyes looking at them from the dark, whatever) The family escape outside of the town, only to find that it is not there; they ask everyone, and apparently it never existed...but the creatures aren't done yet. Hundreds of towns are affected, all disappearing, the populace and the world forgetting about them...except the survivors. They see everything, they remember. The "monsters" are using them for something bigger...
I used heaps of movie parts for this, in fact I made this up on the spot. Just some guidelines for your friend to help him. Of course, you could always do the evil tooth fairy...XD
P.S. I'm new around here.
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