Wow I really like this concept! You shouldn't be so hard on yourselves, you have something really original here, I think it is just a few tweaks away from being a top-tier entry
- the enemies are very hard to hit - the first enemy you encounter should be much easier to hit - maybe you could crouch in order to shoot lower? - or maybe the mouse could be used to aim 360 degrees?
- the game mechanics need more communication, e.g. - as you move, you see particles floating away from you, to signify that you are losing health - when you are near death, you may see some extra filter or overlay/effect - when you kill an enemy, the enemy drops particles which fly towards the player. This way you see the character being visibly 'healed'. - when you reach full health, your character sparkles or glows or something - audio can help a lot here too (accompanying sfx for all 4 of the above points)
Besides that, I think the game could benefit from some kind of tutorial section, maybe some more focused level design to ensure that the player understands each concept. And of course music could be a great addition.
But yeah, overall I enjoyed it and think what you have is really promising. I don't think there is anything fundamentally 'not fun' about it, it just needs some changes.