JOEL - I am sorry that we have shocked and hurt you. I promise it wasn't intentional :-) I guess this all depends on your deffinition of who God is, and what the word omnipotent means to you in relation to what God can do.
There are of course some things logic tells us that God cannot do. He cannot sin; He cannot not exist; He cannot make a round square; He cannot forget anything; He cannot create a rock that is too heavy for Him to lift; He cannot hate all His children; etc. Should the ability to create something out of nothing be included in this list? I don't know. But I do know that there are no scriptures in the Bible that specifically state that God has ever created anything out of nothing.

Here's a little history on this. The concept of creation ex nihilo was not accepted as doctrine until after 200 AD. Shortly before this, an approach to creation ex nihilo was initiated by Theophilus of Antioch and was expanded upon by Bishop Irenaeus of Lyons to proclaim that God created earth and the cosmos out of nothing. This doctrine spread quickly throughout the Christian church and on until the present day.

One of the meanings of the Hebrew verb 'baurau', translated as "create" in the Old Testament, is "to organize, form, or fashion"; the same way a carpenter might organize together some already existing pieces of wood to make a table. In the Old Testament the same Hebrew word used in Genesis for create('baurau'), is used in the following scripture:

"I am the LORD, your Holy One, the creator of Israel, your King." (Isa 43:15)

Obviously God did not create Israel out of nothing. He organized it out of a league of tribes bound together by a covenant with Him (Josh. 24)

Here's something that might make sense to you. Evil has always existed. God did not create evil. For Him to have done this would be completely contradictory to His omnibenevolent character. Evil is an eternal principle that was never created. In like manner we believe that it is an eternal law of heaven and the universe that the principle elements of all matter that exists now have always existed in some form or another and can neither be created nor destroyed (an accepted law of physics called "conservation of mass"), and that God works with this eternal law when it comes to creating things (D&C 93:33, Teachings of the Prophet Joseph Smith, p. 351).
Why should God need to create something out of nothing when He already has plenty of material to work with that has existed for eternity?

Finnally, just to set things straight, we do not "teach" that God is incapable of creating something out of nothing; perhaps He can. We only teach that He has never done it that way because of eternal laws that He choses to follow.

SARAH - If the elements are eternal and can't be created won't they eventually run out? Considering that the gods are "organizing " spirit children etc endlessly.

JOEL - Actually there are no more spirit children being organized for this universe. That was all done before the worlds were created. Please see this page.
But when you think of how big the universe is and all the planets and stars out there, there are plenty of elements that can be recycled and reused for other things.
There will of course be other universes created and populated by children of other gods who will use the elements of those universes. But this is mostly speculation; we really don't understand how it all works yet. Perhaps there's an infinate supply of elements.

SARAH - Interesting...so if God isn't having any more sprirt chldren what are the definitions of "eternal lives" and "continuation of the seeds".
Also something different between catholism and mormonism is the notion of eternity vs. eternities.

JOEL - To Latter-day Saints the phrase "eternal life" refers not only to everlasting life but also and more particularly to the quality of life God lives. Eternal life is available to all people who have lived on earth who accept this gift by their obedience to God's laws and ordinances. "Eternal lives" is just the plural form; refering to exaltation of many people or to the spirit children of those who have achieved exaltation.

"Continuation of the seeds" is refering to the eternal increase one can have after one achieves exaltation and godhood and starts having spirit children which populate the planets of a new universe thus continuing the seed of the parents into eternity.
For us there is of course only one eternity. The plural form "Eternities" can represent the infinate number of new universes that are created and populated by new gods. Each succeeding universe represents an eternity.
This is all getting into doctrines that we don't know much about yet, nor could we begin to understand how it all works. We really try to concern ourselves more with the here and now for right now.