Palacios is currently on trial at Hull and the midfielder is hopeful of earning a deal with the Tigers following two very difficult seasons with former club Stoke City.
In order for Palacios to have any chance of earning a new contract though, he will have to improve his fitness levels according to Bruce.
"Wilson needs games having not played for the last 12 months," Bruce told the Hull Daily Mail of the Honduras international who previously spent time at Tottenham and Wigan Athletic.
"You can see he needs games. The more he trains the better he will become.
"You can see he still has nice touches on the ball, but he needs to improve his fitness levels at the moment."