The Dungeons isn't a modern horror ride, its an old boat ride with a horror theme slapped on followed by a walk through guided attraction. Alton Towers needs dark rides, getting rid of the Haunted House building would be an awful idea. I could support gutting the building and installing a more modern dark ride, but I'm not convinced it would be significantly better than Duel anyway.
Also as Nemesis proved a flat site for a coaster doesn't make for a great ride, a more interesting site encourages a ore interesting layout, thats why so many US parks have great coasters than feel a bit boring, the land is too flat.