Gah, correct me if I'm wrong, this might be happening this weekend!
Yes, I can certainly agree that asterisk 2 will happen if it comes up in your game over the weekend. It took my group one session to decide that memorizing a table was too much effort and having to reference the table every combat round slowed combat down too much.
The order is as follows (Sodalis just assumed one party was the DM):
1) Attacker announces incoming attack (but not attack mode) to defender. Attacker provokes AoO's from anyone around him, and may be forced to make a concentration check or lose the attack mode.
2) Defender announces which defense is being raised if not flat-footed or out of power points.
3) DM compares attack mode and defense mode on the annoying chart he spent the last five minutes looking up. The number on the chart modifies the defender's will save.
4) Success or failure is determined by comparison of the two rolls. If the attack was successful, the attacker rolls damage as indicated by the attack mode.
5) DM spends the next five minutes trying to figure out if the defense mode used confers any special resistance (ie. mental hardness).
6) DM spends next 5 minutes trying to see if the attack mode used offers any special benefits (ie. Ignore mental hardness).
7) Any remaining damage is applied to the appropriate ability stat as temporary ability damage.
8) Defender gets his turn. If a newbie, he will attempt Psi-Combat and waste another 15 minutes, without progressing the combat any significant amount.
9) Repeat from step one until all players get tired of dealing with it.
10) Spend the next week trying to make sense of Psi-Combat system.
11) Spend next month trying to come up with a house ruled system that actually works quickly and easily.
12) Decide its impossible and simply ban Psi-Combat from now on. Instead give the Psion a couple of bonus feats.
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Or at least that's the way it worked in my campaign. I'm pretty sure we followed all the rules, but it was painful.