The challenge goes like this:
Firstly, for a horror, we challenge you to:
Challenge One:
(Quite easy) Add in some other world entrance eg: from some other world far off past all other dimentions something has come to earth to terrorise unless it is stopped....
Challenge Two:
(A little bit better) Instead of using a ghost or appirition, use something else, and have your characters caught up in the middle of it with no help from the outside.
Challenge Three:
(Depending on how good and skilled you are, I'd say it was a reasonably one to attempt) Using only five characters maximum (And even a dog or animal counts as a character) set in one single place without moving (eg: they start off in a grave yard and then go back to a lab to investigate, that sort of thing, or start off in one side of town and go to another.) and have them taking on some horror (This can be anything you want, but try to stay away from ghosts, it's too cliche!)
Challenge Four:
See set characters and places and try one of the other challenges with them (See character horror page)