That's the movie adaptation. The producers likely got that impression from the fog and falling snow from the first two games. In fact the games never say where the town is located. Given the timeline and geography described, however, it's a safe bet it's in New England (I go with Vermont for my fan fiction, but I remember someone saying it was in Maine).MichaelTumey wrote:I've never played Silent Hill, although I've been told the original story is about the Cherry Mine disaster, a multi-year burning coal mine near Cherry, Illinois
As to the OP, all of the Silent Hill games draw on the idea presented in the first game that what we play is based on the nightmares-made-real of Alessa Gillespie. I found using a dreamscape (one of the PC's or an NPC's) in the Nightmare Lands works. Rules for the surrealism of dreams in D&D are out there. I use The Nightmare Lands Boxed Set from 2e adapted to 3.5 and ideas from the 3.5 book Heroes of Horror. There's even a free set of dream rules by Jester here that's based on the original Boxed Set. Overcoming past (and present) fears and enemies is actually a core theme in dream-based adventures so the idea is covered as well.
Here is the wiki site for anyone interested in more about the series.

