There's a REC 2 underway, eh? I'll have to keep an eye out for that one.
As far as how scary REC is, I wouldn't say it's horrifying, but it has its moments. It always leaves you wondering what's going to happen next and the ending is pretty freaky, but I won't spoil anything. More than anything else, it's a really good zombie movie. I'd have to say it's one of my favorites. I had to download it with subtitles, but I plan on seeing Quarantine in theaters and buying it and REC when they come out on DVD. And I personally never had a problem with the camera style, it moves like you would expect it to with somebody running for their lives with it.