Following r00d's advice, I just watched The Last Exorcism - not bad! Enough twists to keep it interesting, for sure, and it's mostly not what you'd expect. I give it a thumbs up!
I'd recommend V/H/S for additional found footage laffs. It's good stuff, got some bro-ish-ness in parts, but you eventually see how that fits the movie well. It's clever enough and there are enough twists to keep it interesting. YellowBrickRoad is also interesting in parts.
I like the idea of found footage because it sort of gets to the root of what makes a movie 'good'- story, IMHMFO. The production value cost of entry is sort of a non-factor because if the story is there, and there is some thought as to how the piece is put together, AND the acting is believable enough, you have a recipe for entertainment.
I look at found footage as a genre in and of itself. Like any other genre, it has it's standard defining elements (documentary crews that underestimate what they are in for, still shots from a stationary camera that while they show no on-camera action, it captures important audio which then increases the tension, etc.), but it's what you do with those standard storytelling elements that makes the story entertaining.
It's sort of the ultimate in guerrilla 'film'making - anyone, anywhere can do it, and do it well with an extremely limited budget. Okay, Cloverfield is an exception.
I like to think of them as short stories, no matter the length of the movie. Typically, there is not enough time for character or plot development, its mostly a short expose and then the strange story unfolds with a likely twist at, or near, the end. Sci-fi and horror lend themselves to the short story format best, and movies like Event Horizon and games like Doom III use found footage as a great story driver.
Anyway, enough of my rambling.