Caveat: I stayed here during Dreamforce, one of the huge tech conferences that San Francisco has the pleasure(?) or hosting. So, my views may be a little coloured by the crowds and high costs associated with such peak times.
The Palace Hotel is situated right in the middle of Market St, and is perfect for getting around the Financial District. There are restaurants, bars, cafes aplenty, and easy access to cabs, buses cable cars... you can't go wrong in that respect. However, if I was travelling as a tourist I'd try to find somewhere in an area with a little more character -- it's very business-focused around here.
The interior is reminiscent of a bygone, glorious past. This isn't a criticism -- it creates a rather grand atmosphere. The front desk staff were very helpful, and I was left in no doubt regarding the options open to me. Again,my room left me feeling that this hotel must have once been the height of glamour: it was a little small, the bathroom wasn't exactly state of the art, and I struggled to get the iron to remove creases from my shirts. But overall it was perfectly serviceable for a business trip and probably rather more comfortable than I'm used to on business travel.
I can't recall the name of the bar / restaurant but it was very good. The cocktails take a little while to arrive but that's because they are made properly. Worth the wait, and the extra price.
The room price was very high but I suspect that was down to the conference being in town. That said, the location probably means they can usually command a higher than average rate.
Those describing it as 'grand' and 'classic' have it pretty much spot-on. It's got bundles of character and great service -- just don't be surprised when it's not quite at the standards of more modern hotels.