Does Perma Death make a game scarier?

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Getting back into Planescape made me realize just now how similar the death system is in both games. The difference is only in how it's tied into the gameplay and story. In Amnesia you are instantly teleported to the place where you died with the monster despawned and no explanation is given at all. In Planescape however the fact that you cannot die is an integral part of the story and usually you wake up in places where you would expect to find a recently deceased corpse. It leaves a little to be desired in most cases but I think it definitely is a clever way to handle the whole death issue. It's written in such a way that it does not feel like a transparent game mechanic at all, which I think is admirable. I know the number of ways you can tie death to the story are somewhat limited but it is definitely possible to do well, and you don't need to resort to the extremes (hand-holding on one hand (pun not intended) and on the other perma-death).