Continuity mistake: In the first movie the "Welcome to Silent Hill" sign is on the right. In this movie it's on the left.
Continuity mistake: In the first film, "Red Pyramid" is portrayed as absolutely massive. (Judging by the scene in which he rips a cultist's skin off, he is about 10-12' tall) Yet, as evidenced in the final fight sequence, he appears to be significantly smaller in this film. (7-8' tall).
Continuity mistake: When Heather is in the elevator, and the monster slashes it up, the hole on top changes to a bigger cut in the next shots.
Continuity mistake: At the end, when Claudia transforms into the final creature after touching the seal/amulet, her human body begins to disintegrate. As she screams and the scene cuts from a medium shot to a closeup, all of her hair suddenly vanishes between shots.
Continuity mistake: When Pyramid Head cuts the prisoners arms off, one falls in front of Heather, the distance between heather and the arm change between shots.
Continuity mistake: When Heather comes home to see that her dad is missing. She sees the Come to Silent Hill, and the lamp is some what on the chair's arm. When the cops come in the room the lamp changes.
Continuity mistake: When Heather is in the mall and sees the guy hanging upside down, the way the man rips the flesh looks and moves is fake, you can see the hole of were the flesh ends.
Answer: I believe your theory is correct, it appears to go out of focus to help cover up some unconvincing CGI. The final explosion looks very cartoonish.
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