I will be using a pregenrated character to explain some of the final details handled by the game master.
Name:Maliki
Race:Dingo
Racial power: critical striker 4 times damage on critical strikes
Basic knowlages:close combat( low medium,)read (low),bind wounds (low),scout(low),iIntimidate(low)
Advanced knowlages: weapon speicalitly(hammer),
That looks good enough for a basic sheet to explain how this all works

The first thing the dm will have to do is translate the character's knowlages into usable skills and passive effects
lets start with combat skills because they are relatively easy for me explain.
But first a question why does the dm do this and not the player mostly because i don't want people using this to over power their character the same that they all have to pass their racial power by me to have it verified.

So lets check out our characters sheet up above first thing we do is check the basic knowlages for any of the combat related skills and it doesn't take much because we have 2 levels in close combat to deal with.

Now close combat is most easily explained as a skill of the character to handle weapons that they not be intimately familiar with from any weapon finesses they may posses.

Now lets see a combat skill thaty may be apiclable to this sill for the first level

Heavy blow 2sp 20 damage

But how do we figgure that out well heres a little guide to creating a combat skill
"name" sp cost x10 = damage
So you name it figgure out the sp then times that by ten basicly to get the damage but what if you want a speical effect don't worry i have you covered letss see the second level attack
Stun 4sp 30damage+Stun
see now with status afflicting attacks you take ten damage away and add a effect but thats not all you see for each ten you take away it gets a +1 to that effect meaning it is much more likely to afllict when used(becuse you can hit with out stunning with this attack the stats are basically a normal attack but a half damaged attack will not stun where as a critical hit will have double damage and the stun will longer lasting)
here is an example of an attack i created for Illisionary magic that is basically all status affliction
illsionary fog 4sp blind foes
so its a much more powerful status afflicter then the stun we see above.

So all that should make it fairly easy for any game master to create an attack for any charcter that is tossed at them lets move on to the passive effects

Passive effects like attacks are fairlyu straight forward in all honesty if we look up we can see all the knowlages the character has.

Now as a rule of thumb basic knowlages give out more passive ablitys and advanced knowlages give out more combat ablitys.

So this charcter has read that means he can read as a passive effect both his native tounge and the common languge. simple right? he has intimadate that means he is passively more intimading then someone with out it and so forth.
now he also has close combat witch means he has the ability to use common weapons and regular weapons
but also has weapon fineness for a hammer so is by far more familiar with it.

All clear?
this game system was created for my self becuse i hated the over powered charcters with out any reason for being so damm strong so someone else might be able to do something with this