The system is not terrible. Clunky, yes. And all those special subsystems that were in AD&D that 3e tossed out? Well, Palladium is chock full of those. It's playable, although, it has some quirks, especially where armor is concerned. I personally think Palladium 1e was better than Palladium Fantasy Second Edition; no SDC for living creatures, for instance, and unique hand-to-hand skills for each class.
As far as settings go... Palladium fantasy is topnotch. To be honest, I consider Rifts a creative goldmine (which is to say, little specks of gold mixed up with some silver and lots of lead, mud, and slush). Rifts is fun, it really is, and it lends itself especially well to conversions and plundering. But the original Palladium setting is a genre classic, a real swords-and-sorcery world. Wizards going mad in their quest for power and immortality? Check. Cthulhoid elder beings? Accounted for. Gangs of thieves, mercenaries, wandering priests, and mages, looking under every rock for wealth and magic? Oh, it's there all right. Plus lost civilizations, soul-sucking swords, Egyptian-themed deities, psionics, and pirates.