I heard the Fatal Frame games don't have much combat, is that true?
No. A large part of the Fatal Frame games involve combating ghosts with a camera. You play in 3rd person while you explore, and when you combat ghosts you switch to the camera and it goes to 1st person. Ghosts have health and by taking pictures you damage them. I've only played the first two, and there are definite required battles in each, as well as final bosses.
If you're looking more for a combat-less console horror game, I'd check out the PS1 Clock Tower if you haven't already played it. It has terrible controls (point and click with a PS1/2 controler *shudder*) and ugly graphics, but it's definitely worth quite a few scares and some uneasy tension.