I'm gonna have to strongly disagree with you on this one, OP. Did you play the original Silent Hill 1 on the PSX and get all the endings??? In one ending...
***SPOILER ALERT***
Harry DIES in a car crash. It turns out the whole game was a dream in his head, and the monsters weren't real. And in his passing, he leaves behind his daughter Cheryl. And in SM, we find out the game is about Cheryl struggling with the emotion of Harry's death from a car crash which happened in the old PSX game.
***END SPOILERS***
Regardless of whether or not the developers want to call "Shattered Memories" a new game or a re-imagining, SM does have perfect continuity with Silent Hill 1's "bad" ending. I'd say the game is pretty Silent Hill.