So if there's game mechanics, like in M&M, my players will start to think everything must be solved in a metagame-level. Like what are the options for grappling in M&M or what kind special attacks can you make with a sword... What I'm trying now is this:
"Ok guys, this is free-from game. See this single sheet of A4? It has all the rules there is. So now you're grappling with a werewolf, what do you do?"
That does sound like it poses a significant challenge. There are several possible solutions, but as Kamikaze Midget points out, a major problem with many of them is that it puts a lot more work on the DM. The core issue appears to be:
1) Difficulty with simulation-heavy games and mechanics
2) A preference for limited and easily understood options
So how to deal with that?
1) Pick an appropriate lite-rules based system. Keep mechanics ultra-simple and make the game much more freeform. This may prove unsatisfactory, however, if the players are looking for something more tactical....you may have the paradox of rules-averse players being unhappy that they're not really playing an RPG, but an advanced version of "let's pretend" with slightly more rules. Even these systems may be more confusing than they want, but that's a personal thing. I understand
Ennie Nominee BASH is supposed to be fun and rules-lite, though I've never played or read it.
2) Pick a system like M&M and play fast and loose with the rules. Tell them, essentially, "
Don't worry about your character sheet and stats." This may sound paradoxical, but here's the most important part: when you make a character for the game, make a single cover-sheet that has all the relevant character data they'll need. This is NON-MECHANICAL stuff. Piratecat does this for his M&M convention games and it works beautifully [and still allows for wide interpretations of those characters]. This sheet would the important character beats: a general description of his powers, his origin and past, major character points and most important equipment/allies/foes/etc. It doesn't have to be a lot of material...think of an entry from the Marvel or DC Handbooks.
3) Choose a system like M&M, and then limit your players choices. It sort of sounds like they're petrified by choice and really want the game more on a 'game' level than RPG. In that interest, make up some 'Power Cards' for them, not unlike 4E's power cards. Include something like a 'COOL STUNT' card for using Hero Points (and make yourself some Villian Point cards) and then make the game more limited to their power and ability choices. This has the potential of making it almost a board game, but might be more in line with your players desires/expectations.
