When people are referencing Hostel as a good movie, are you referring to the edited, or unedited version? I saw the theatrical (edited) version, and I was actually quite bored. Yes, the movie got gory at the end, but to me, gory doesn't automatically equal scary.
Anyway...
I think the main problem with Hollywood released horror is that they're dumbing down the movies to cater to a larger audience; editing down movies to get the coveted pg-13 rating. But they make the movie so tame that it becomes boring. Occcasional gems are still making it through though. I raved about The Descent for weeks after seeing it. I thought the re-make of Dawn of the Dead, while not scary, was very entertaining. And I know people either love it or hate it, but I thought The Exorcism of Emily Rose was very chilling. And I'm sure there are plenty more out there (especially from non-Hollywood sources).