one small scare

I wouldn't say so really. There's no way to die in the game, so there's no real sense of danger. There's one chapter that's designed like you're having a nightmare, but it only uses horror cliches with the purpose of misleading the player.

If weird surreal stuff makes you feel uncomfortable, yes. If you're afraid of dark areas, also a yes. But there's no danger and not a single jump scare or anything. There are situations that seem to build up some tension, but imo it doesn't work because there never is any scary music, mostly just jazz tunes.

Originally posted by SpielSatzFail:

... not a single jump scare or anything.

Well except for that one. Boo.

There's some tense and definitely disconcerting moments, but I'd never say horror, unless you consider existential complications. >>

no man, just a very small part but it's not really horror. Please note that I hate horror movies/games and anything related to that

Not an horror game but it can get spooky because there is a lot of walking blind in completely dark areas and areas with endless void which can be vertigo-inducing. Third level is a bit nerve-racking if you don't like horror but it's turned into a joke at the end, no monster shows up or anything.

the closest thing to a jumpscare is there is a freezer door cracked open and brick behind it. if you look close enough behind it for like 2 seconds it will abruptly close

There's one level that's horror based. But then again, it's mainly just unsettling darkness so not really.

I'm up to the part with smeared blood on the floor, and bloodied handprints on the wall.
Does it get worse than that? I was happily playing along with my kids, but this part is freaking them out!

Originally posted by Karlodinium:

smeared blood on the floor, and bloodied handprints on the wall.

I don't know what you're talking about, I only saw red paint.

My seven-year-old saw sleepness nights and waking me up constantly

Yes, in parts.

I'm currently playing the level I think they're talking about, and went to the discussions to find out specifically whether or not I had accidentally bought a full-on horror game (it didn't have the tags for it). The specified level is definitely horror, working mostly on suspense, darkness, and creepiness. I'm glad to hear if it is the only level like this: that means I can persist.

Good on the people who it doesn't affect. Personally I think they misunderstand horror if they think you need to be able to, game mechanically, "die" to be affected by it. All games happen behind a monitor: whether or not suspense builds up to a monster or not is kind of irrelevant. Obviously horror works differently for different people, and I understand some need that specific angle for it to work, but it is not the sole definer.

Thanks for the comments @Archmage. Yes totally agree. They are obviously using some horror tropes.

I'd welcome any insight as to whether it gets worse than this though. My kids are fascinated by the game, but I don't want to subject them more if the "horror" part continues.

The "horror" part is there to mess with your expectations and does not continue past that chapter. You can use it as a learning experience for your children, to not take everything they see at face value. There is no blood, it is red paint and that is explained at the end of the chapter.