I categorically reject the notion that D&D "cannot do" horror. I personally DMed a "weekend in hell" style Ravenloft game over the course of 3 years in the 90s.
Ravenloft is my favorite 2E setting hands down. It's true that if you feed "beer and pretzels" into one end you're not going to get Gothic horror out the other. Thus the setting books talk about DMing techniques (the more so as new versions of the setting appeared): withholding information from the players; creating a sense that the characters are isolated, underpowered, and underprepared (even if they aren't); and using all the characters' senses to convey detailed but possibly misleading information about the world around them.
But as stated, creating the right atmosphere is not a DM-only operation; you need players who are willing to let their characters experience
dread (in the purest sense of the word). Personally, I had a group of players who loved being worried for their characters, not quite knowing what was going on or what they were facing, and allowing their characters to react appropriately in situations ripe with dread.
Not 100% of the time of course. I've also run standard dungeon crawls that happened to take place in Ravenloft—a different set of players made a complete wahoo hash of
From the Shadows, for example, illustrating perhaps the point I'm actually trying to make: Ravenloft works as a Gothic horror setting when it works as a Gothic horror setting.
