"I wake up in the evening."
Translation:मैं शाम को जागती हूँ।
"ko" is used when stating the time of something, rather than translating the English "in." Literally, it's like "at the evening." As for shaam, it sounds to me like the normal word. Jaagna is wake up, verses uThna = get up.
Is the postposition necessary or can it be skipped? I was marked wrong for leaving it out, though there was no postposition in a previous example (something like 'We wake up in the morning').
It is necessary in this sentence, in the context of शाम. In the context of सुबह the को is often skipped.
Just so you know, your proposed sentence is not wrong. The sentence in the answer is comparatively better. Your sentence looks correct to me as a native Hindi speaker and everyone will understand what you mean to say.