In the dark with headphones really does give you the amnesia experience you deserve
I did the whole game and the first few mods like this and it was amazing! I can't be bothered to do it any more as all the mods I have left now seem to be about half hour long and it's hard to build up the atmosphere in that time
But seriously, I wouldn't say it makes it any scarier as such, it just absorbs you into the game/atmosphere much more.
What I don't recommend is playing with headphones with the volume right up; man did I have a heard attack
XD