Realise this is an old question, but was looking for the same book myself and finally found it!
The Edge of the WorldThe Edge of the World by John Gordon
This review covers the details of the question.
The Edge of the World is a YA fantasy novel first published in 1983. It primarily tells the story of Tekker and his friend Kit, who discover that through moving small objects with their minds (telekinesis) they are able to open up a parallel dimension in the English Fenlands. However, the parallel world is far from being a marsh, but is a burning-hot barren red desert from which ‘horseheads’ emerge. These nightmarish creatures have empty horses skulls, but walk upright on two legs.
Although they are warned not to open the parallel dimension by an old man who once went there and lost what was dearest to him, Kit and Tekker are forced to do so when the controller of the horseheads, a reclusive local woman, harms the mind of Kit’s brother, Dan, and he slips into a coma-like state and then nearer and nearer to death. The only way to undo the damage is to restore a key artifact to the possession of someone who is imprisoned beyond the desert.
The scene where the horse skull creature becomes something else in their world:
Kit understood before Tekker. She saw the rag hanging from the nail beside the doorway, and beyond it, through panes of broken, dusty glass, the thin branches of a dead tree which caught the breeze and flickered across the sky. They were the Horsehead's arms; its skull was the rag.
