I think more than the health of his knee should be considered here.
Even if Palmer plays Week 1, will the Bengals pass with the same frequency and with the same number of deep patterns? Remember, long passes require more protection time than short passes, and therefore increase the likelihood of a hit on the QB.
Also, will the Bengals stick with the no-huddle offense exactly as seen last year or will that be limited in its usage, altered in its execution, or even eliminated? I'm guessing there will not be much difference, but do we know for sure?
This all said, I'm not avoiding Palmer in my drafts. However, I agree that at the cost of a 4th or 5th rounder, there's not as much value to be had. So I just start to wonder if I would prefer some other owner to take on that risk, while I stock up at other positions and settle for a QB in the 10-15 range that I should be able to get in round 8. If he slips to the late 5th or 6th round, then I'll have to think hard about drafting him.