1. If this is canceled that means development hasn't really started yet. Konami has no problem at all with releasing shitty SH games, so it's not like they would let a bunch of developed game go to waste.
2. There's absolutely nothing stopping Del Toro and Kojima if they actually want to make a scary game together.
So I don't feel so bad about this, because I think if Kojima really wants to do it, he will do it. And if he didn't really want to do it, the project probably wouldn't have turned out that great anyway.
In an interview with IGN, del Toro said, "I love working with Kojima-san. We are still in touch. We are still friends and working into doing something together, but that’s not going to be [Silent Hills]."
Guillermo del Toro also detailed a bit about what Silent Hills -- though still very early in the development process -- could have been.
"We were in the planning stages, and it’s a shame it’s not going to happen," del Toro said. "We were talking about really pushing the boundaries of the new consoles, and making the game really mess with your head. One of the great moments in Metal Gear [Solid] was Psycho Mantis. The idea that a game can actually interact with you, and stuff like that."