This is another reason why it would be good if "fn" could be used as a single modifier, as it is possible with another app.
The issue with Fn is that it isn't a modifier at all, but a hardware toggle. Based on Peter's comments in the past, it seems as though it can't be used in the way you'd hope.
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I know Peter's comments and nevertheless I use this feature every day exactly like this.
fn+i opens the inspector in Scrivener. I could list dozens of examples. Without fn as a "modifier" I would have real problems.
Works perfectly. Not with KM, But you know with another app 
I should have specified "can't be used by Keyboard Maestro in the way you'd hope".
I took @peternlewis 's advice and/or developed a Conflict Palette- Regular Palette system for my shortcuts. In fact I use Conflict palettes within regular palettes and it works fine. Muscle memory kicks in a lot quicker than it does when you have to remember lots of direct key strokes. In fairness it is not intuitive that that will be the case but it really is.
In my view this a very much neglected feature of Keyboard Maestro. Nearly all of my usage of Keyboard Maestro is now through palettes. I admit I have idiosyncratic usage and not really 'power' user level, with apple scripts and what have you.
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@tudor_eynon can you explain how you do it exactly? Do you choose the same shortcut for similar actions, like open brower and then a palette appears with Safari, Chrome etc.?
Pretty much as you imagine in principle.
Here is my main tool on my Mac. I use cntrl + spacebar to pull it up, it is really a Keyboard Maestro palette triggered by that shortcut.
You can see several actions for start with a 'w'; if you press 'w' a conflict palette shows and then I press the second letter and trigger the action. Very quickly it feels as if you are just pressing the two letter keys in quick succession, it works that fast. I have actually forgotten that there is a conflict palette involved it becomes so quick and automatic.
A whole range of Safari options I open with 'a', and again that brings up a conflict palette for the next step.I get on this webpage using it, "a", then "c", it works as fast as typing the two letters; though I might unconsciously now keep a slight delay.
In another example from the same palette "Show palette for screenshots" the 's' key press just brings up another palette with a variety of screenshot options and shortcuts again triggered by letter keys.
None of this is coding or scripting etc.. I think it is a true innovation on this app. where it beats out a lot of competition, even from native shortcuts and so on. I use this feature a lot and the iterations can be quite elaborate as you can see. Does this make sense?
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That actually makes a lot of sense! With the exception that I do not like the red palette. Just kidding 
Let me think about it in more detail. I'll get back to you.
Thanks @tudor_eynon
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Is that this, only with conflict palettes?
What I'd love is if you could selectively show/hide macros in a regular palette so you'd retain the hotkeys to trigger them. The only way I know to use a regular palette is to show the whole group.
I have conflict palettes and regular palettes which open from that initial palette. I think there are several ways to iterate these. In my strategy there is no difference between a conflict palette and any other kind really. From the 'user' point of view as it were.
You can use the Show Palette of Macros action to show a palette with any selected macros.
Macro Groups can be configured to always active and sometimes show a palette to ensure hot keys are always available.
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After thinking about it, I have to say, your @tudor_eynon palette system is impressive. I did not know that this could be done. Well, there are many things I do not know I would adapt it to my needs but … it is too slow and not intuitive enough for me. I prefer „grouped“ shortcuts and other "palettes“ that work more directly.
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Nothing is faster than a shortcut you know by heart. With Multipress macros (thank you, @noisneil) I can group similar actions and trigger them with one shortcut that I don't forget. eg cmd+3 brings to front browser A, B or C. That's fast, intuitive and all I need here.
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I use the free app Touché (and BTT), which displays a virtual touch bar on the screen. It's a kind of palette that is freely configurable, can display icons or text, and is always visible at the bottom of my Macbook screen, just above the f-keys. In my browser this „palette“ looks like this.
The icons represent 10 web pages that can be opened with the f-key located just below the icons. e.g. The KM forum is F2. The finger goes to the icon. That's all. If I press and hold command 10 new icons representing 10 web pages appear. cmd+F2 opens the KM User Manual (which I never use ). Again 10 new icons appear if I press option or ctrl. That is similar to nested palettes, but faster. This way I can quickly and intuitively open 40 web pages that I recognize by the icon. I do not have to remember anything and can also trigger any KM macro. In VLC media player I start my favorite songs by icon and in other apps other things. This is my „Poor Man's Stream Deck“ (I hear noisneil laugh ). In fact, it may be even better than the original because everything is on board. Anyway, I like this better than the original touch bar because I have physical keys. I tried to build this with KM, it works but is not optimal for various reasons.
There is no right or wrong here. Everyone has to find what works best for him or her, right? Of course, I can warmly recommend my system 
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Oh for goodness' sake! 
How did I miss this?! I'm sure I must have read about it but it fell right out of my head. Thanks @peternlewis!
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This palette developed over a few years I must say: for me, after a very short time the basic strategy became blindingly fast believe me. I could never remember the native shortcuts for screenshots, I don't use them often enough, I get a brief reminder on this palette with no real loss of speed. Maybe if I was doing something literally hundreds of times a day that might be a factor.
Some idiosyncrasies creep in, that is the beauty of Keyboard Maestro though. You can see for example that 'A' on that palette is for launching Safari with various sets of tabs. I use it every day. However at some point, there was some rationale which I forget, I put a text expansion there too, it all works fine. The text expansion 'Aw' gives this piece of text 'Philadelphia The City of Brotherly Love and Sisterly Affection' an irritating and pretentious trope I picked up from Mayor Nutter and used a lot at one time! I think I was using the phrase while linking some site to somebody quite often or something. It is now in memory and really quite obvious by just looking at the palette: for me that is.
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Thanks Much noisneil.
Wow - thanks much for this - I am trying it now.
Thanks for this great idea Peter!
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I may be missing something, but as far as I can see, you still can't use the hotkeys already assigned to the macros with this, and they behave like conflict palettes.
If the macros are active, then the hot keys are active.
If the macros are not active then the hot keys are not active.
Whether they are in the macro palette or not makes no difference to this - except that conflict palette keys may override some hot keys for the duration (eg, if the conflict palette has a highlighted “G”, then a macro with hot key “G” would not trigger while the conflict palette is shown).
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Ah ok. I like that the group palettes display the macro hotkeys but no matter; I'm sure I'll get used to typing first part of a macro's name rather than its trigger. 
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