Recently, when questioned, on Tomm Hulett official blog, if Book of Memories was canonical or not, and if it fits in with the main series, the Silent Hill producer answered:
(…) That said, BoM’s story is canonical.
This means that Book of Memories, despite of being a spin-off when we talk about the gameplay, it still serves the series as a canonical entry, something that most of the fans didn’t expected.