He was talented enough to have a HoF career, if things went differently for him. What hurts him is that he played on really bad teams most of his career, the Islanders were really bad and in LA he was also mostly left to do it all by himself (had a brief time with Allison and Deadmarsh, but all three were very injury prone). In 02/03 Palffy scored 85 points, while the next best forward on his team had 38. That's mind-boggling. Then he left the Penguins before they would become contenders not long after. Could've had a cup or two and at least a couple more high-scoring seasons had he stayed and played with Crosby/Malkin.
The other thing that hurt him were constant injuries, which made him miss significant time in his prime and probably caused his early NHL retirement too. Some injuries really hurt his career, for example the way he was playing in 03/04 he would've been one of the contenders for the Art Ross (in a low scoring year). In 00/01, he was on pace for 3rd in scoring, had he not missed 9 games. He was also on pace for another top-10 finish in 99/00, but missed 18 games. In the 9 seasons that I consider his prime, he missed 134 games and (based on pace during each season) roughly 145 points.
However, his career was too short and too unaccomplished (although that was not his fault really) to make the HoF.