MerricB said:
Personally, I don't think that's the case. The DM needs to know all the options being used by monsters - which is in his purview - but not those held by players. Instead, the player must be able to describe the effect to the DM in terms that can be adjudicated.
If you only run games for a limited group of players, and if those players include no one who either (1) needs help understanding rules (i.e., makes errors by mistake), or (2) is willing to exploit your lack of knowledge to his benefit (i.e., makes errors on purpose), then you might be right.
Of course, if you don't understand the abilities that the PCs have, you can encounter problems running scenarios where things are happening behind the scenes that the players don't know about. If the Dream Wizards are secretly scrying on the group, and all of the incidents of the last 10 sessions are based on that, you'll have egg on your face when you explain what was happening, and one of your players uses Option X that invalidates it.
(I'm not claiming that an Option X exists in this particular case; I'm sure someone with access to all the WotC splatbooks will be able to determine a particular case where this sort of problem will occur.)
"That's been happening all night! What's going on?"
"There's a mild poison gas throughout the entire complex."
"But I'm a Y! I'm immune to poison!"
You can run a game where the DM doesn't have to know what the PCs can do, but it isn't one I'd be interested in.