I think there's an interesting discussion in there somewhere about the differences between the original and the remake and how defining a slasher's backstory seems to put sympathy where it doesn't belong: on the bad guy.

Well, yeah. Part of the horror in these films is that this "unknown" force, person, entity, etc. is preying on it's victims. By giving Billy a back story, and showing him, and humanizing him, the horror is gone. I mean, shit, the scene where Billy grabs the girl's hair is terrifying because you don't see him. It just comes from off screen.

You aren't supposed to identify with the killer. Well, you can, but if you do so, it's not a horror film anymore. In name, maybe, but what's scary about following a character around killing one dimensional victims? What's scary about knowing his motivations?

Billy in the original, you don't know who he is, you only have an inkling of his back story, etc. The fact that he just walked right up to the house and breaks in, seemingly at random, is what makes it scary. Giving him a reason to be there, not so much.

In the remake, they add a weird yellow skin disease to billy, which turns
out to be really ridiculous. And then the weird incest angle is just
that...weird.

Well there you go. Is there incest in the original? Who is Agnes? It MIGHT be his sister, and they MIGHT have done something incestuous. But nothing is fully explained. Scary.

Yellow skin? Hepatitis.

I was really disturbed by the fact that he just walked into the place, like you said, without any motivation and just started killing them all. Pretty much all of that was lost in the remake, although to their credit they kept it kind of sick.

Really, the moral of the story is that slasher villain backstories really take away from the scariness of the film. I can safely say there's no exception to this.