Sounds like you converted a mp3 back to wav this will make it way to big for Palace to play, even 3MB is to big. Palac does play mp3's IF you convert the header (the first piece from the mp3 wich tells the palace what type of sound file it is) but 1MB for each song is the maximum filesize I'm afraid.
What usually works best is the folowing sound settings:
22KHZ sampling frequency
8bit audio.
This sounds pretty crappy compared to your MP3 or CD music but its the only way to get it to play for everyone.
Here is a site that covers most of MP3 stuff:
http://www.studiodust.com/riffmp3.html