Does enhancing a character's physical attributes necessarily reduce the feeling of terror?
Not necessarily.
Take the current situation, for example. With enhanced physical attributes, your character can jump farther, but for the player, this means having to leap over gaps that seem impossible to cross in real life.
At this point, the player must wrestle with their survival instincts, which in itself can be a source of terror.
It's like having two little people fighting in your mind: one, the instinctive little person says, "No way! It's too far, you can't make it, and you'll fall to your death!". The other, the rational little person says, "It's fine, it's just a game, so jump from here, stop dawdling!"
And at the moment of the leap, as you gaze into the bottomless darkness below and feel the wind rushing past as your body takes to the air…
For the average player, it's still a very terrifying and exhilarating experience.