I like the idea. I've been on Freedom City and it was a good place while it worked... There have been many point that have been talked about, so let's give my opinion on each of these:
World Background:
I would go with modern earth with all new heroes. That would explain why everyone is low powered heroes at start. As the world evolve, time pass, heroes become more powerfull, as villain. The idea of a phenomena that repeat itself every few years is a good idea, that would raise the number of heroes/villain on earth with time (as the number of player grow larger), but I wouldn't restrict the people to it. I mean, if I want to play a cyborg, it is not phenomena that will transform part of my body into cybernetics...
World Area:
Now, I would go with something more like LEW, that mean that there is a central point where people gather and can have adventure. Now, what to have for that center point? An hotel (read as Inn)? Not sure it would fit. Maybe a virtual space, a forum where people, normal and heroes, gather on the net to discuss (but what would happen to someone who doesn't know a thing about computer?) or a governemental building (but what happen to independant?)
We could also go as FreedomCity was doing. Determining who come in an adventure OOC, but it break the RP... For now, I don't any idea that tells me 'That's the one!'
System:
I don't have the book, but for what I have seen up to now on the 2nd edition, I think it will be ebtter to go for it. And Bront is right, it will be better to keep the world running if we start with teh latest version. I think it will get out in store in the few next weeks. I am sure we can wait, anyway, there is a lot of decision to make before startting to play.
You want to see the preview of the 2nd edition? Just go on
www.mutantsandmasterminds.com
Time System:
Immuable. The past cannot be change. With that we simplify a lot of thing. You want to do something in ancient Rome? Go in another dimension where the ancient Rome still in power.