What some people find so appealing, I think, is how the looked, the songs, the overall feel. It had that same contrast going that you get in Twin Peaks or many a King novel: on one side you have a comfy small town, all warm colors and quaint locals, beautiful sunny nature, on the other darkness within the woods/beneath the surface. Only you get more of the latter here. And there was no denying that the visuals were top notch, especially as x360 was well into its lifespan when the game was originally released on it. The gameplay was repetitive af, the story was basic bitch, but the "feel" was enough to carry the game for many.
What would be interesting here though, is someone tracking out the course between the initial release and the game becoming a "cult classic". The initial reception was alright but the impression that I recall was that of mild disappointment - especially compared to the original promise of Twin Peaks inspired open world investigation game - and the game begin forgotten rather fast, to a point where for a while the surviving talk of it was mostly on whether or not is PC version ever happening. So how a hyped but quickly forgotten exclusive became a cult classic? I suppose some of those youtubers that you people love, ones doing hours long analyses, might have an interesting topic there. Genesis of a cult classic. We have this happening well into internet era, where the mentions and discussions can be tracked, so it ought be much easier to follow than the cases of some say 70s or 80s movie that initially had lukewarm or worse reception but eventually gained that status.