@GregT, if you are referring to this macro:
MACRO: @Palette Show/Hide Palette for @FrontMost App
then I have found a solution/workaround to the issue you describe.
The key is to re-enable the macro group AFTER the palette has been closed, like this:
Does this make sense to you?
I think @peternlewis has added an option for the upcoming Ver 8 that will allow us to show/hide a palette without changing the Group's Active status.