Q:
Why can't I make my palette a key window?
A:
The idea is that you can now drag items off of a palette without having to make that palette window key ("key" meaning the window or application which is in the foreground, and which will receive any keyboard input, if applicable. Key windows have black title bars). That can save a couple of gestures compared to the way dragging behaved in Diagram! 1.1.
NeXT is actually encouraging this sort of thing with the new behavior of Drag Services under NeXTSTEP 3.0. Most NEXTSTEP developers who use the drag and drop metaphor will be incorporating similar behavior. To see another example, try dragging an item from Mail into the Workspace when the Workspace is the key application. And no need to switch applications. An interesting side effect is that you can now drag from one application to another when neither application is key.
Valid for 2.x.