The more M.R. James I read, the more I like the guy’s writing. He’s very good at creating a mundane, triflingly pleasant world and then shattering it with the horrific. For instance, here is a passage from early on in his short story Casting the Runes:
“The Secretary and his wife were lunching out, and the friends to whose house they were bound were Warwickshire people. So Mrs Secretary had already settled it in her own mind that she would question them judiciously about Mr Karswell. But she was saved the trouble of leading up to the subject, for the hostess said to the host, before many minutes had passed, ‘I saw the Abbot of Lufford this morning.’ The host whistled. ‘Did you? What in the world brings him up to town?’
‘Goodness knows; he was coming out of the British Museum gate as I drove past.’ It was not unnatural that Mrs Secretary should inquire whether this was a real Abbot who was being spoken of. ‘Oh no, my dear: only a neighbour of ours in the country who bought Lufford Abbey a few years ago.'”
This sounds to me much more like Jane Austen than anything else. There are only a few paragraphs of real horror in this story, and a few more of vague mystery, and both are led into very gradually by this sort of light stuff. And, in my opinion, it’s not jarring at all. He makes it all blend very well, so that the horror stands out–as it ought to.
Another example is his Mr. Humphreys and his Inheritance. There’s only one paragraph of actual horror in that story. And it occurs five brief paragraphs before the end of the story. The preceding stuff ranges from purely descriptions of everyday life to hints of odd goings-on.
In summary, James came up with the concept of Pride and Prejudice and Zombies about a century before anybody else did. Only instead of playing the juxtaposition merely for easy laughs, he managed to turn it in to actual horror.
UPDATE: I should add that the flaw in his writing is that when he does, at last, bring the horror element in, he sometimes resorts to using simple violence. This is, I think, a crude device in horror fiction. The great thing about H.P. Lovecraft was that he could suggest the frightening without any violence at all.
If you combined James’ style with Lovecraft’s conception of “cosmic horror”, you’d really have something.