For Palmer to have fantasy success they will need to be behind and in a time crunch. Palmer performs at his best when Bratkowski is not calling the plays and they are in hurry up mode. I do believe that he has physical/mental issues at this point that will prohibit him from ever entering the elite conversation again, but there is serious potential for garbage time points. I wouldn't characterize him as "turning the corner", as previously stated his success from a fantasy standpoint depends almost entirely on the situations above.
The good news for fantasy owners, to the detriment of Bengals fans, is that they should be behind quite a bit. Their offense is utterly stagnant and woefully inept when Bratkowski is making the calls. They shoot themselves in the foot with penalties and playcalling early in games that cause many 3rd and long situations which often result in 3 and outs, putting them behind early and often. Look at the offensive stats in the first and second qtrs compared to the third and fourth.
As far as Palmer's health, at times his arm looks fine, and others it is as if he is throwing into a 50 mph wind tunnel. He lets balls sail high on him by not stepping into throws, especially when there is clutter around his legs in the pocket. He can still rip a long pass on occasion that makes you think he is in good health, but often those long bombs of yesteryear are a couple yards short or off target. I suspect that his elbow tightens up on him and that is when you see the disparity, but I firmly believe the biggest hurdle he has is mental. I think his healthy knee is affected greatly by his unhealthy fear of reinjuring it. Though that is mostly speculation based on his current mechanics.
As a Bengals fan, I really hope they start preparing for the future without Palmer, as I no longer feel confdent that he is the "franchise QB" that he once was.