The ability to create a palette specific to a particular application is quite nice.
But I do not generally quit major applications; they stay open in the background so I can quickly use a given application.
So what would be helpful is not the option to show a palette when I "activate" an application or when it is "active." Rather it would be helpful to activate the palette when the Focus is on that application. Is that possible?
I'm afraid I don't know what you mean. As I understand it, activating an application brings it to the front, i.e. focuses it, and the palette options that let you show a palette for a particular app until an action is explicitly taken to hide the palette already seem to me to work in the way you describe. As an example, if I set up my Safari macro group like this:
KM displays a palette whenever Safari is activated/focused on, and hides it when Safari is deactivated/no longer the focus. If this isn't what you mean, can you show us how your application palette(s) are currently configured with screenshots?