I thought this idea would be very rarely implemented, and I think a lot of it has to do with power scaling. But anyway, if there are 3 RPG genres I adore, they are Pulp, Lovecraftian Horror/Plain Horror, and Supers. I think they get pushed back with all the fantasy and sci-fi out there, and maybe this will combine them. The pulp will be only background, like how Lovecraft Horror is Horror Pulp in a sense. But, the game would revolve around street level superheroes (Watchmen, some X-men, etc.) with fears and doubts, facing sanity-blasting monsters. I don't want to make the monsters exclusively Lovecraftian, like throw in Werewolves and such, but also give some examples of Lovecraftian things. But yeah, like I said, low level supers either foiling cults Lovecraft style, or going to Transylvania and busting up Dracula style. What do you think?

I have my reservations about sanity systems.  I find it difficult to believe that people, who are otherwise psychologically healthy, possess minds of such a malleable nature.  Under extreme circumstances of enduring long bouts of mental and physical stress, I can certainly see the logic behind PTSD, but I don't think seeing some otherworldly things a few times is enough to throw someone into a straightjacket.  Furthermore, I could imagine that superheroes, who, through experience, are most likely to be conditioned to face high levels of stress on a regular base, would be more resilient against external influences that could cause systemic and irreparable psychological trauma.

However, think about this: what if superheroes were more genetically predisposed, as a result of their various mutations, to suffer from personality disorders, which would certainly be exacerbated by their chosen professions (along with extra-dimensional things with tentacles)?  What about those superheroes with powers such as telepathy or psychokinesis?  Certainly their mutations would have a profound effect upon their mental faculties, right?  I bet they are just waiting to collapse into ultra-dangerous paranoid schizophrenics (who subsequently team up with extra-dimensional things with tentacles).  In my opinion, that would be one way to add cohesion to your genre combination.

That does make some sense. Also, they are not overly experienced super heroes. I was considering making it an event in the story where the heroes GET super powers and these horrors appear.

I'd think you might want to create a Super-Power & Super-Vice system.

When you create a character you choose a certain number of Super Powers and at least 1 Super Vice.  (There may be some tradeoff that if you take more Vices you can gain more Powers)

Your Vices will result in stuff like Paranoia, OCD, irrational fears (The Human Flame is afraid of Water/Ice), Power-Weakness (Kryptonite anybody?), etc.