Palmer undoubtedly outscored every Real Madrid attackers last season, and no one at his age is better than him at Real Madrid.
Real Madrid always surprises and they can do anything for the players they want. Mbappe is perhaps one of the most dramatic players bought by Real Madrid with full drama in the previous transfer market.
It's normal for every player doing well in their particular club to be linked to Real Madrid in some manner; it's a dream team for most young players, but not for those trying to develop because playing time is limited due to the team size. I'm not surprised Palmer is linked to them, Saka and Foden were at some point.
They got Mbappe on a free transfer; they attempted to sign him two seasons earlier but had all of their bids rejected. They usually approach with a big cheque, but it is ultimately up to the club to decide whether to keep or sell as long as the player is under contract.