I'm just removing support for palettized textures from an engine at the moment as we're unlikely to release a game on any hardware that supports them.
It got me thinking though... why have palettized textures lost so much popularity that they're effectively non-existent these days?
I get that block compression is going to produce better quality and size results in typical cases, and I get that you could cobble together your own inefficient texture LUT support in a fragment shader.
But it seems to me that there are some textures where a 256 colour 8888 palette would do a much better job than, e.g. a DXT5 or a PVRTC4. There are also some cases where palette switching tricks would be a handy memory saving trick, e.g. for applying team colours to a sprite.
And GPU support for palettization seems simple (from my naive standpoint as a user of GPUs rather than a designer of one!) a 256 colour 32-bit palette would only take 1K of texture cache, texture unit hardware copes with far more complex encodings than a straightforward lookup table.
I guess I understand why texture palettes fell out of vogue, I don't understand why they are completely dead. I think I'm missing something.