I think betting on Palmer to be a first-team player full-time is a dangerous dangerous move from City.
He has made 4 substitute appearances across his career in the PL and has come off the bench for a CL game or two. Sure he looks good in the League cup when he is playing much lower levels of competition. But we haven't seen what he can do at the next level.
I genuinely would not hate the idea of him going on loan to a PL team or a mid-level team in Germany or Spain or even a high-level championship team and getting himself some real first-team minutes.