Does Perma Death make a game scarier?

[Googolplex]

No, it's just frustrating. You have more fear to lose all your advance, instead of the monster itself.
In a short experimental "hardcore" game like Justine, this probably works. But it also prevents me to finish the game yet. It would be better, when restarting the current area, but not the whole game from the beginning. This also would only work in small areas! Remember Penumbra, where you have very big areas with puzzles - it wouldn't make the game scarier when you have to do all advantage again!!!
To prevent immersion breaks after a death, monsters should not kill the player completely. They should just quell the player to the ground and then walking away. The player should stay immobile and weakened (can't see clear, be slow and uncontrollable) for 4-5 minutes!!!
When a player don't want to be weakened, he could just load a previous savegame. But the point is, that the game itself does not break or automatically reset the player. The game continues.
So, it's really a good idea to make the player immortal? No! When you jump down a floor or sth, you should die, but this should only happen when making a controlling failure.
The consequence of death by a monster is, that you are almost uncontrollable and weakened for some time. And I mean for 5 minutes. This is a long time when the protagonist is "unplayable" for this time.