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This review concerns the 1997 original.
As a horror film, this isn't anything special. Downer Endings are par for the course in the genre, so the bad guys winning is no surprise. The victims aren't very developed as characters; we only have a few minutes to see them interact as a family before the killers show up, and nothing really happened in that time to make me care for them. We do get some legitimate Character Development near the end after Peter and Paul leave momentarily, when the son has been killed and the father and mother share a kiss, but by that point it was too little, too late, as far as I was concerned. I also find the family's reactions to their situation hard to understand, but I've never been in such a situation, so I can't judge.
Peter and Paul, on the other find, are absolutely fascinating, recalling Leopold and Loeb. Like the Joker from The Dark Knight, they could simply be demonic forces of evil from another dimension. Paul is cracking up and grinning one minute and staring with cold eyes the next, and Peter seems like someone you can trust, but perhaps underneath, he's even more dangerous than his cohort. These two are the characters that make the film interesting to watch and a worthy experience.
Regarding the You Bastard message; forget it. I've never given anything to that trope, and don't feel obligated to really empathize with fictional characters. On the other hand, as a narrative taken on its own merits, Funny Games is quite engaging, if a bit boring, and I enjoy it for the story it has.
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