I played a lot of Palladium games in late 80s through 90s--Robotech, Rifts, TMNT, Heroes Unlimited--and we had a lot of fun with it. At the time, it had some things that, say D&D 2E lacked, like skills and a more detailed combat system. But even then, there were things that were off with the system, like scaling for difficulty on a skill, and man, talk about a game with no balance!
I really think that if they had really taken a good hard look at their system and modernized it, maybe during the d20 craze in the early 2000s (and not necessarily jumping on the d20 bandwagon) I think they could have become a major player. There were a lot of really cool, fun ideas among those messy, old fashioned mechanics. When the Savage Worlds version of Rifts came out, my group played a short campaign for a couple months, and while SW isn't my favorite system we had a blast. But you couldn't pay me to play the original system.