In OS X 10.9 Mavericks, the computer goes to sleep immediately when the power button is pressed. PowerKey still sends your replacement keypress, but does not prevent the Sleep function.

OS X Mavericks: Using the power button
Learn how the power button works in OS X Mavericks.

1. Tap the power button in Mavericks to put your Mac to sleep or to wake it up.
2. Press and hold the power button for 1.5 seconds, to bring up additional options.
3. Hold down the power button for 5 seconds to force the computer to turn off.

PowerKey no longer blocks the 1st item on the list, a quick press of the power key. Need to support/block the new Mavericks interactions.

EDITED WITH THE SOLUTION BELOW

(Note that this issue has been corrected in OS X 10.10 El Capitan and later versions. This fix is only needed if you're running Mavericks)

Additional steps for OS X 10.9 Mavericks

OS X 10.9 introduced new behavior for the Power key:

• Tap the power button once to put your Mac to sleep.
• Tap the power button again to wake your Mac.

In the 10.9.2 update, Apple made this behavior configurable:

defaults write com.apple.loginwindow PowerButtonSleepsSystem -bool NO

To disable this immediate Sleep behavior and make the Power key usable with PowerKey:

1. Update OS X to version 10.9.2 or greater.
2. Open Terminal.
3. Run the command: defaults write com.apple.loginwindow PowerButtonSleepsSystem -bool NO
4. Log out of your OS X account, then log back in.
5. Run PowerKey.app; pressing the key will now not immediately put your Mac to sleep.