I'm reserved on this one.
Just because we've been told there would be a 'Hollywood' Fatal Frame movie before, announced and everything - and the project died.
Now, before I go further, please note that if we DID get a movie, I would go to it multiple times and get everything I could on it,even if it was bad - because yay for my blind Fatal Frame support.
The ABOVE being said, I am not sure how 'good' a movie we would be looking at.
There are some amazing low budget horror movies, and then there are some AWFUL high budget horror movies. This is a horror movie being based on a game, and we don't have a great track record. Also story, are we focusing on Miku & Mafuyu, one of the other storylines? Or are we making a completely new storyline here? There are a lot of variables that I can see people loving or hating, and then the simple question: 'Is it scary?'
If I was going to do a story, I would do Miku & Mafuyu (throwing in references and maybe SMALL cameos of some of the characters from 2 & 3).
How I envision the ghosts would be the effects done in The Messengers by the Pang brothers. (great effects, not so much of a scary movie though) - note, there are other movies that I have loved the effects of, just that that one particularly struck me as perfect for haunting yet subtle yet terrifying fatal frame theme.
There are places that I would want it to be 'normal' and then other places where it could be supernatural (just not over the top). There's a LOT of backstory in the first story that you could elaborate on further.
(Although that being said, I would like them not to mix up Edo period clothing etc...)
Sound effects especially would be important. (Anyone who has played / or heard the difference between Kirie's entrance in the first game Japanese versus English. yikes!)
Anyways, getting way off topic...
Could it work? Yes. Could it be crazy creepy and scary yes.
Is there a high chance? Probably not.
Will I still go see it - yes.