Damian, this is only relivant from a page or so ago, but just so you know man. There are rules with hard numbers for creating your own spells in Mysteries of Magic, so when people ask if there are rules for making your own spells, you can say "Yes!"
Just thought you'd want to know.
OKAY, as for this whole "G.M.s should allow everything B.S." (and it is B.S.!), that is the surest way to destroy a game. Its not only a matter of power, its also a matter of theme. If ANYTHING flies, than you end up with Cyber Knights/Cosmo Knights in your gungry NGR Cyberpunk Style game and Mages in your Coalition games, and weird combinations of superhero powers that are "unbalancing"
See, the concept that there is no game balance in Palladium is a lie and a misconception. Its just "balance" is based more off contribution over "power", just like in comic books or film. Each player should have the ability to contribute just as much as everyone else, regardless of their "power level" as per the Justice League or Avengers. The problem is, a lot of players want to be Superman but don't want the vulnerability to Kryptonite or any sort of emotional attachment/connection to any other person/place/thing. Worse,
most of the time the players who want to be superheroes are power-gamers that essentially want power for nothing. "Why would I want to learn magic or be psionic when I can shoot blasts that do more damage and have no P.P.E. or I.S.P. cost? Plus, if its a superpower than no one can take it away and I don't need E-Clips."
This makes for BAD long stories unless that is the theme of the entire game, without vulnerabilities, weaknesses (mechanical or psychological "Being a child, etc.") than super powers CAN allow a character to turn themselves an unassailable wall. In fact, my first experience with super powers was someone pitching a character to me who was invulnerable (+700 M.D.C. and impervious to most forms of attack), and could turn into gas (which essentially made them impervious to the only things that could hurt them). Worse, the character was just "a mutant" who was "born that way" and looked 100% human. In fact, they were attractive. No drawback. No weakness, and an impressive suite of skills since they were a Vagabond. So, this character was essentially going to dominate every aspect of the game and take away a lot from the other players. "If we can get super powers, than **** being a juicer!" said another of my players, and from a mechanical point of view he'd be right. Why would anyone want to play someone with the flaws of a Crazy or a Juicer if you can just slap super-powers on another character?
That is my problem with it. So, I typically do not allow it. That said, in my current game, I gave each of my players a random superpower (rolled at random) from the book of heroes. However, none of them knew that coming into the game, so they're all still learning the origins of these powers, what they mean, and how to use them. So obviously I have NO PROBLEM with superpowers. However, I want them to be important, or interesting, or effect the character, rather than just being an excuse to have power X, Y, and Z at no cost, without bothering to thinking of how that would impact the story or your fellow players.
Anyone who seriously expects me to let ANYONE play WHATEVER they want without regard for the group, my plot, or the game's theme/setting, is frankly being a bit of a short sighted jerk. If I allow something, it is because it is manageable. If I don't, its because its not. If I am playing a HIGH POWER game (my last attempt ended with my players having no interest in being all-powerful, ironically enough), than I typically allow anything, even super-powers. However, I expect it to be done well and people doing DUMB ****, like picking power combinations just to make them completely impervious to all forms of damage in the game should still expect a hard no, and as a Game Master that is my RIGHT. Likewise, I think if MORE G.M.s just said "No" than people would typically have better game experiences.
And before that is refuted, I've had "power gamers" come to me after the fact and thank me. It took a LONG time (about six game sessions; 1 and a half months of regular gaming), for them to "realize" and "level up" enough to see it, but its happened.