Silent Hill 1/WMG

Alessa Gillespie is based on a painting.
Namely, Andrew Wyeth's Christina's World. The house in the beginning cinematic is very similar, perhaps even a simple retouched detail of the picture. Christina Olsen, the subject of the picture, was nearly immobile due to an unknown form of muscular deterioration; Alessa Gillespie was crippled from her injuries in the fire and moved via wheelchair. Both Alessa's Silent Hill and the titular world are desolate and bleak.

The first game is just Harry Mason's Dying Dream.
Yeah, Jossed by the third, but it's one of the endings.
 * Furthermore, he is trapped in the dream for all eternity, constantly repeating the events of the game. This explains how in a New Game+ Harry begins in the diner instead of at his car and how.
 * Well, the game does take a lot of its cues from Jacob's Ladder...
 * Possibly recanonized in/set in a different continuity of the remake, Shattered Memories..
 * That would make for an interesting fanfic duology. SH 1 is Harry's side of the dying dream, then it continues in Shattered Memories, with Cheryl finally coming to grips with what really happened, and finally letting go of the more fantastical elements.

Cybil isn't Dead.
Like Harry, she went into hiding after the events of Silent Hill 1. The reason we never hear about her afterward is because she and Harry parted ways to maintain a lower profile. It isn't that she's dead, he's trying to protect her.
 * Certainly untrue. Harry does not take any security precautions of his own until five years later according to Douglas' notes in the third game, and only after being attacked by a cultist--and even then, all he did was move to a different town and had his daughter use a pseudonymous first name. He didn't even change his own name. If Cybil went into hiding, she did it so fast that she never even bothered reporting back to her police headquarters, and so deep that no trace of her was ever found. Wheeler from Homecoming stated that he worked with the Brahms PD at the time this happened, and that after she went to Silent Hill, nobody ever saw her again, and only the remains of her broken bike were any clue to her fate. Given the fact that Harry would have been a far more likely target and he never made any serious attempt to hide himself or his daughter, it would make no sense that Cybil would hide at all, much less disappear completely from the eyes of the known world.

Mages Dahlia is probably a Nephandus with the merit that links her avatar to the town itself. She's using Alessa as a channel to summon her lord, the Cult's God into this world. However, Alessa is also a mage, who sends her Avatar, Cheryl to try and retrieve help. The rest is history.

Leonard Wolfe is Alessa's father.
This ties into my other WMG about Dahlia being Claudia's mother. It makes all of them one big screwed-up family, and makes an extra layer of hell for Cheryl/Heather to escape from. As for why they didn't raise their children together, they could've had a falling out, or decided that God preferred the children never fully realize their connection.