Hi! I tested this! So firstly make sure you're on the latest version of Pixel8r (2.72). The last one had a bug with palettes.
Secondly, the way I have it interpret palettes isn't very intelligent at the moment. It expects the palette to be laid out as a horizontally laid out, 256 wide image like so:
Testing this one on my end it works perfectly:
That's my fault as I didn't document that well.
A smarter, more unified palette/LUT feature is on the todo list for a future version, though it will be a bit slower to process and probably be part of a big paid update which adds a ton of useful new features (especially for Quake modders!)