> Does horror lit work better when it's a novella/short-story? Or do you disagree?

IMHO: Many horror stories depend on building up and then delivering a "big reveal", and maintaining that buildup without ruining the reveal is easier if you don't have to do it for very long. A Twilight Zone or Shyamalan ending would feel frustrating at the end of a much longer work, and you risk the audience getting bored or figuring out what ending you have planned (or, worse, an even better ending you didn't write.)

Many people say that the movie Jaws was better than it would have been if the animatronic shark hadn't broken, because fear and suspense are not heightened by seeing the scary thing but instead by not seeing the scary thing.

It's hard to have a very long story while hinting at but avoiding showing a scary thing. I'm sure it's possible, and perhaps House of Leaves is an example, or The Shining, or cetera, but I think it's noteworthy that Lovecraft, who firmly believed that showing the scary thing was inferior to either not showing a scary thing or having the scary thing not be a thing, or both, had only short stories and a few novellas.

I'm not a big horror fan, though I've read a fair bit of it because it was there, but if you haven't read it, I suggest Different Seasons, not so much for horror, but just as some of King's best work. IMHO. Odds are you already know two of the stories.