Palazzo rooms are everything the Venetian rooms are, only newer.

Palazzo has a smaller, quieter, and more intimate casino. It is usually much less smoky. The Grand Luxe Cafe there is rarely full even at times when the Grand Luxe over at the Venetian has long lines. It is closer to the Wynn and Fashion Mall.

Venetian's casino is always more packed. The poker room is also located at the Venetian whereas the Palazzo doesn't have one. It is much easier to walk to Dennys, Harrahs, and cross the street over to Mirage etc.

For rooms, I will always choose Palazzo over the Venetian. But the Venetian is more convenient generally speaking.