One of the big buzzwords that appears in a lot of the Rifts material is how "realistic" the system is. While it might be more realistic than AD&D, it is still full of wallbangers. The big one is the explanation of how "realistic" the experience and level system is. [sarcasm]Sure, it's realistic for you to become a better chef by killing monsters. Or get better at killing monsters by cooking gourmet dinners. [/sarcasm]
The problem with most level systems is that everything tends to level up, even the stuff that doesn't really make sense. While I could go with a simple point-buy XP system, there are a couple reasons not to:
1) I cut my teeth on GURPS, and it has a large impact on my game designs, especially on an ambitious project like this. I don't want to simply "default" to the GURPS solution. I want to challenge myself as a designer and explore other options.
2) It's not really Rifts. If I can come up with an advancement scheme that encompasses all the malarkey about "there's nothing like experience to teach you something", I'd rather use something like that.
My proposed solution: An advancement system in which skills advance as they are used.
Every failed skill roll earns a "skill point." Each 5 skill points earned grant a 1% bonus to the skill. This allows a beginning character to achieve competence rather quickly, but still requires a good deal of time to become a master.
The next step is the interesting part. Every 10% of skill a character earns, grants them a "milestone," something akin to a d20-style feat which typically relates to that skill. Note that since every skill starts at stat +10% (see last post), each skill a character starts with includes a milestone.
Since the system is largely skill-based, milestones are the primary means of character differentiation in the game. Two characters with Martial Arts 60% can have widely divergent milestones, and might even have different numbers of them. While milestones for the combat skills will provide combat powers, other skills will also have appropriate milestones, much like Exalted has charms for every skill.
But wait, you say. How can such a game be balanced? Without levels or other indicators, how will the GM know how powerful his group is? Even point systems like your beloved GURPS have point totals that the GM can use as a guideline.
But as someone who has actually played and ran GURPS, I'll let you in on a little secret: Points don't matter.
More accurately, they matter when balancing characters against each other. 100 point characters all have 100 points of effectiveness, but will likely have spent them in different ways. So one character can put all of their points into being a bad-ass fighter and another into an ace accountant. The accountant will likely get creamed early in any fight, but he's the guy you want at your back should you ever get audited. The fighter might be able to save you from terrorists, but he probably can't do his own taxes. So while each character has their own specialty and spent the same number of points on it, it's not the same specialty and neither one crosses over very well.
So, as we see, points balance characters, but they're not useful for balancing encounters. For that, you're actually going to have to look at the character sheets. See what the characters are actually capable of and plan adventures around that. (Some of you over in Palladium-land might be doing this already.)