Try it and see. It's not the standard advice that's given, but I think we have to be open to new possibilities. If it were possible to keep the shaft in the palm and still remain as loose as a goose then maybe there might be advantages. I'd be worried about the loss of reach, and perhaps fine control over the blade orientation, but perhaps that's just a matter of practice. It is possible that the advice you were given was part of a package of things that work together to address a particular shortcoming, perhaps.
But the message here is clear: whatever you do, try to stay as relaxed as possible. If using the palm means that you tense up then you might lose any theoretical gains.
It's an interesting and unusual suggestion. I'm going to give it a go today. It doesn't sound "right" to me - but then again as Dave Kalama pointed out, there's not much about a good paddle stroke that is intuitive.
Yes to everything you said. It's funny how hbsteve had to remind people like me not to assume that palm grip equals death grip, which is obvious now that he said that.
I was reading about sprinters who believe that some tension in your hands is better than none, which was an interesting sidetrack to this.
I'm always wary of saying any technique advice is definitely right or wrong. What seems like scientific truth now will be viewed as naive next year. As you said, the palm grip conflicts with what most people here seem to do, but may be perfect when combined with other advice for any particular person.
I think the next technique focus (which has already started--see the recent Travis Grant videos) will be to NOT reach too far. In swimming, when "reach" became king, people started rotating and reaching as far as possible because "more reach is better" only to reach so far that they had no power until their hand came back several inches. Smart swimmers and coaches realized if you cut out the last few inches of reach, you not only cut out a fraction of a second, it also means you don't waste another fraction of a second pulling your hand back to the point where you have some power. Better to just put your hand in where it should have gone in the first place, start the catch there, and get right into the pull.
people, the bit of extra reach you get from a non-palm grip may just be allowing you to reach further than is best for you.