See, the problem is you're not separating fiction from reality. Creating fictitious evil is different from creating actual evil. They recognize what they've created in the game is not something that should be done in real life. However, they recognize that what makes horror scary is that things that shouldn't be done, are done.
Basically, you're approaching this as "they created something disturbing, they should be ashamed." However, a more accurate description of what they did is "they IMAGINED something disturbing". Does imagining an evil make you evil? Hardly, humanity thinks about evil all the time because it would be naive to assume that evil is not around you. Telling a horror story or making a horror movie is merely giving form to the evil that is imagined. Likewise, this scene is an imagining of evil expressed visually for others to experience. The evil remains fiction, and as such remains benign.
It also begs the question, Outlast has some pretty gruesome deaths in it, why is it this scene is the one that crosses the line? How can you say it's fine to put your name on the game for the rest of it, it's just this one scene that's wrong? I get a suspicion that you're getting upset over something trivial.