The concept is not entirely novel, but well formed here. I like the idea of everyone being able to create their own powers, though that always leads to questions of "how can we nerf them to reasonable expectations?" I do like the simplicity of the concept, though that can play against us in that it doesn't always have the hook that draws in certain players. I also like the potential open-endedness of the horrors, very good. Leads to expansion packs and players coming up with good answers.
I certainly find myself inspired to make a couple characters for this system, though I can't begin to count the number of goth "Crow" types this genre SHOULD create if this really happened, heh. Part of this system that is going to be hard though, is really the power creation system. It's easy to say "you can do anything!", and very hard to quantify what happens when a lightsaber tries to cut through adamantium. *shrug* I think this could be helped by taking the lead of previous more superhero style of system like Aberrant, Trinity or Marvel Superhero, something like that.
The writing is brief, but carries the concept across. I'd like to see some more flesh on the bare bones, though, just to see some other thoughts on how we could take this concept.

Comments
Good questions. I left a lot
Good questions. I left a lot open in the brief treatment but I see the gross conflicts of surviving without a lot of technology and surviving being hunted by roving nightmares. There are also subtle conflicts around staying safe or venturing out, figuring out what has caused what happened and conflict between the wakeful themselves. I also see political conflict between rival factions of geeks with superpowers, each responding to the world catastrophe very differently. The Big Bad is also out there with some kind of plan behind it all
The strengths of this setting
The strengths of this setting remind me of "Wraith: The Oblivion." In other words the setting as a whole really grabs me, but I'm really curious what game play would involve.
What would players do? I'm not asking so much here about mechanics, but rather the action of the game. What's the conflict? I'm having a hard time seeing beyond 'fight the nightmares.'