The Chilean experience is a negative confirmation of Lenin's "State and Revolution." He explains that the state is bodies of armed men that defend the interests of the ruling class. The only way to achieve socialism is to demolish the old state and replace it with one based on the armed working class, known in Marxist jargon as the dictatorship of the proletariat.
The horrible thing about Chile is not just that it resulted in mass murder, but it also issued in the long wave of capitalist reaction that we are finally beginning to break out of. The Chicago School of economics used Chile as a laboratory and the model was applied elsewhere, from post-Solidarity Poland, to Bolivia, to Thatcher's England to Yeltsin's Russia.
The best Marxist analysis of Allende's downfall is from the SWP's Pathfinder Press, titled "Chile's Days of Terror." I also recommend Seymour Hersch's book on Kissinger which has some explosive revelations about the role of ITT in fomenting the coup. Finally, for an expose of Pinochet's economic "miracle," I recommend Joseph Collins's "Chile's Free Market Miracle: a Second Look," from Food First books.
Louis Proyect
(http://www.panix.com/~lnp3/marxism.html)