Here's why it would make sense economically, if not necessarily artistically. The Palace has approximately 800 seats in its orchestra level and around 560 seats in the mezzanine. If you don't sell the balcony, you can treat the Palace as a 1400-seat theatre. A sizable portion of that orchestra level would be dynamically priced so the gross potential could be huge, like $2M a week or more. Presuming it's a limited run, you could recoup and generate a pretty substantial profit in a short amount of time. I think the show's producer - who, it should be remembered, put August: Osage County in the Imperial Theatre for its first five months - is hoping for the same sort of potential volume for Kieran Culkin etc., as Good Night, and Good Luck with George Clooney at the Winter Garden.
By contrast, the Longacre has 500 seats in the orchestra, 320 seats in the mezzanine and 250 (mostly terrible) seats in the balcony. One quarter of the Longacre's seating is in that balcony. Looking at the orchestra level alone, would you rather be able to sell 500 seats at your top tier price, or 800?
Plans may have changed now that the Longacre became available, but as I said up thead, I heard the Palace, and there is a financial model that could work for Glengarry at the Palace.