[D]el 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."
You really should not count these horror chickens before they hatch. Del Toro famously packs his future schedule extremely tight and he seems to like to load up on very exciting-sounding projects that have the tendency to fizzle out in a puff of industry blockage.