I agree and disagree. It would be great to have Cole Palmer playing for us right now, but we have the benefit of hindsight.
At the time, no one questioned City for accepting a £40m+ transfer for a player who'd made 19 appearances (and, most importantly, who wanted to leave). The transfer worked out fine for all three parties.
There are tons of 'what if' players we let go. It's the nature of our new model (build the best academy in the world and sell young players to fund first-team transfers). We can't make room for all of them; some will inevitably become exceptional players for other clubs.
I would say that Cole Palmer WAS NOT a MAJOR mistake by us. The reinvestment of the money we received for Cole was the major mistake.