A palazzo can be a palace, but most people don't reside in palaces. Since in Italian palazzo has a much broader meaning than its cognates in other languages - including certain types of residential buildings and office buildings - it's more likely that a showy apartment building is meant here.
PS: This problem is of course because the word palace arose in Italian's ancestor language. When languages borrow words from other languages, it's often as a technical term for some specific new concept. E.g. in French a chef is just any boss, and if you don't say chef de cuisine when you mean one you risk misunderstandings. Conversely, in German a Campus is always a university campus (perhaps not so surprising), and a Slide is always a page in an electronic presentation. Sometimes this gets really absurd. E.g. many years ago German speakers borrowed the term handy phone from English (which seems to have been in use in the early 1990s or so) and shortened it to just Handy - now the German word for mobile phone.
Also, words with a foreign feel (such as palace or even palazzo in English) tend to continue designating special concepts, whereas words that feel natural in a language (such as palazzo in Italian) often tend to be used more and more widely.
I don't see the contradiction.
Quel is a demonstrative determiner that can be added to nouns such as il palazzo or, in the other thread, il nero:
- quel palazzo e grande = this/that palace is big
- quel nero e un colore neutro = this/that black is a neutral colour
Quello is the corresponding demonstrative pronoun that stands on its own:
- quello e grande = this/that [one] is big
- quello e un colore neutro = this/that [one] is a neutral colour
Since lo can sometimes function as a pronoun, it is perhaps best to think of quello as quel lo, roughly meaning this one or that one.
The other sentence ("Il vestito che mi piace di più è quello nero.") is a bit tricky. In quello nero, nero is used as an adjective that qualifies quello (which could also stand on its own). In particular, it does not mean this [shade of] black, but it means this one [which happens to be] black. We would only have the same situation in the present sentence if we wanted to say something like this one [which happens to be] palatial. But I don't think palazzo can be used as an adective in Italian (translating to palatial or otherwise). So the two constructions are not parallel.
Sappiamo se DuoLingo legge i commenti? È possibile che gli sviluppatori dovranno apportare modifiche alle domande o risposte and dovranno controllare errori di programmazione del computer.
Do we know if DuoLingo reads the comments? It’s possible the developers will have to make changes to the questions or answers and check for computer programming errors.
Except for trivial variations (some minor misspellings are identified automatically), the translations that are accepted have to be entered manually. So of course the list is incomplete at first. If your translation is not accepted, it means that nobody has entered it before and then reported it using the form provided with the "My translation should be accepted" option, or possibly that the course maintainers haven't accepted it yet.
You should just report it so that it can be accepted as correct in the future.
I think it's worth pointing out that this response makes perfect sense in case of a dictation exercise, but none at all for a translation exercise, because the subject io can always be omitted in Italian as it can be deduced from the ending of the verb.
(Fun fact: The Indo-European verbs swallowed what were once independent personal pronouns that followed the verbs. As they became harder and harder to recognise, new optional, 'emphatic' personal pronouns arose that preceded the verbs. That was the state already in Latin. In modern French, where the personal verb endings have become almost silent, that set of personal pronouns is turning into verb prefixes. Therefore a new set of emphatic personal pronouns has arisen.)