Macro Palettes never have keyboard focus. They do not have selections, and you cannot interact with them with the keyboard.
The exception is the Conflict Palette which appears when more than one macro is triggered with the same trigger (usually a hot key trigger, but Typed String and USB Device Key triggers can conflict as well). When such a conflict occurs, Keyboard Maestro displays the Conflict Palette and automatically generates temporary hot keys based on the names of the macros. The Conflict Palette still does not have keyboard focus, nor does it have a selection, but you can use keys to narrow down and/or select a macro from the Conflict Palette.
The other “exception” is that macros that are displayed in a palette are active, and therefore if they have a trigger, that trigger is active. So you can assign them a trigger and use that to interact with them.
Note that a macro palette is still active, and the macros it contains are still active, even if it is displayed as an icon - that is, you do not have to hover over it and expand it for the macros to become active.
I hope that helps clarify the situation.
Generally the best way to use Keyboard Maestro when you want a palette full of macros that you can select with keystrokes is to simply assign them all the same hot key and let Keyboard Maestro generate the palette for you and the hot keys to filter/select the desired macro.