You know what we forgot to do in this one? Make fun of that Anonymous motto about how they’re legion or whatever. I guess we just forgot. Oh well. This is a game that reimagines the internet hacker collaborative or whatever as a bunch of insane homeless people fighting invisible extradimensional invaders. That’s certainly worth some points for originality.
System Mastery 
This sounds like just another game that would be a lot more playable if you made some alterations. I’m actually liking the intent behind the insanity scores, even if the execution sounds flawed. The thing Jon (?) brought up about using violence, and attempting to rationalise what you’ve done sounds like it could be neat.
In terms of adapting the game, I can see it going one of two ways.
You could probably keep the horror theme, and don’t change the setting, if you just made PCs slightly more capable. High lethality and difficult challenges is appropriate for horror, but I think people are going to have trouble staying invested if you don’t feel like you have a chance to actually accomplish anything significant. Might as well just take the setting and use other rules if you’re going for this approach.
The other option is to tone down the horror aspect and the difficult. Horrible otherworldly creatures are still replacing folks, but you’re not so much focused about fighting impossible to beat enemies. Play it more like you’d do a paranormal investigation game, slowly unravelling the conspiracy. Focus on finding out and taking out replicas, and dealing with that human conspiracy group. Keep the insanity stuff, but make it a slower decline. Maybe start as more normal people. But then you’re going to need good rules for character advancement.
There’s a lot of things that could be workable with some adaption, or at least that’s the impression I’m getting.