The 23-year-old is on loan at St Andrews until January as Bruce assess whether he is ready for the Premiership.
Bruce admitted that Palacios arrived at Birmingham via Arsenal.
"We were doing our homework on various players and I was having a conversation with Steve Rowley, the chief scout at Arsenal, about midfielders and strengthening the squad, this, that and the other," Bruce revealed.
"About an hour later Arsene Wenger rang me and said he had had this boy over from Honduras.
"Monaco were going to take him but they couldn't because of restrictions on non-EU players.
"Arsenal, with what they've got - which is not bad with their six or seven midfielders! - didn't take him.
"But Mr Wenger said he was well worth having a look at. So we invited Wilson up and we were pleased with what we saw.
"He's got 40-odd caps for his country, he's of a decent age, so we struck a deal to take him.
"He's a South American type who has definitely got talent.
"It's whether he can adapt to this big, physical element we have in our game."