The fear of something's essence tends to lead to fear for the thing itself. You could also phrase it as: Inner fear transforms into outer fear.

It's basically explaining the horror that permeates the town of Silent Hill itself. You enter the town with your inner fears, and the town makes those fears physically manifest.

The Fear of Blood ( suffering) Tends to Create Fear For The Flesh ( morality)
To me it means the fear of suffering tends to create a fear for one's fate.
This could be a nod to Alessa.

Do you mean mortality? Because I don't know where you're going with the word "morality."

Typo. Yes. lol

Im not too sure about that one but it could mean a fear of death tends to create a fear of living.