Hi Joe
Well the first paart of your quesiton is easy: You don't neet to start the httpd. Like you said it is looking for an ancient library because it is ancient tech. The httpd is a very old apache version used for filetransfers. Your better of using your own Apache server for this.
You can either edit the Pserver.prefs or log onto your Palace server and as Owner use the 'fileserver command:
In your Palace Server you become Owner and type the following:
'fileserver
http://yourdomain.palaceplanet.com/myfiles/media/
Any media you put in there and use in your Palace will now be served up by the webserver. Palace simply redirects the clients filetransfer to use http instead of the ancient superslow Palace protocol.
There used to be a yahoo-group around that helped with converting database entries to usable Palace login / password but i can't find them anywhere.
Your best bet for this is to ask on the Palace Server maillist:
http://tech.groups.yahoo.com/group/palace-server/
The best way to introduce people to the Palace is to use Instant Palace: a web based client you can integrate into your website.
It has only two problems: the official version doesn't work with the nw Java engine, but there is a work around for this
and it needs to be on the same server as the Palace server.
Anyway, thats my personal opion because I think the Palace client is to much explaining to get people intrested.