Its interesting how dumb/gullible people are...I never thought that Blair Witch was 'real', but I guess a lot of people still thought it was 'real' even after seeing the movie. That said, I was one of the people who didn't connect the dots in The Sixth Sense until it was spelled out for me at the end of the movie...and my wife just realized yesterday that Tim Allen does the Michigan travel ads.
I totally agree with your other point. If ever there was a genre that couldn't be reproduced, it was the horror mockumentary. The novelty has already worn off after the first viewing, yet Blair Witch somehow created dozens of copycat movies.
Even though I agree, it's not quite what I meant by suspension of disbelief.
Yes, there were a bunch of genetic cul-de-sacs out there that believed it. But the truth is every piece of media requires a certain level of suspension of disbelief. In most cases for good movies the plot, humor, or even outright absurdity induces that on it's own. With Blair Witch, it induced none of it in me and all of the fans of the movie at the time said, "You have to imagine you're there in order to enjoy it."
Good movies do that automatically, and not require you to go in with the mindset of telling your self, "I have to pretend I'm there".
To each their own, though. There are people out there who can't stand "Plan 9 from Outer Space" and say it's one of the worst movies ever made. I find the movie enjoyable in a near train-wreck fashion, especially since we know that the flying saucers went back to being Ed Wood's hubcaps after the shoot.