McCain campaign - not Palin - came up with "palling around"; Schmidt regrets largely true ad
Marc Ambinder has an advance copy (link) of a book about the 2008 elections from Dan Balz and Haynes Johnson, and it might contain a good number of behind-the-scenes tidbits.
For instance, one of the mistakes that Sarah Palin made was to claim that Barack Obama was "palling around" with Bill Ayers.
Except, it was Nicolle Wallace of the McCain campaign - and not Palin - that came up with the "palling around" bit.
That allowed the mainstream media to mislead about the relationship between the two, dismissing that relationship by pointing out that they weren't close friends and using that distraction to cover up the series of past links between them. See the contemporaneous coverage of the article from Scott Shane of the New York Times. Despite the fact that that article tried to cover up the relationship, Wallace wrote the following:
"Governor and Team: rick [Davis], Steve [Schmidt] and I suggest the following attack from the new york times. If you are comfortable, please deliver the attack as written. Please do not make any changes to the below without approval from steve or myself because precision is crucial in our ability to introduce this."
Actual "precision" would have involved pointing out that they had a series of affiliations and that the NYT wasn't telling the whole truth about that. Wallace's idea of "precision" hurt Palin and the McCain campaign.
Further, Ambinder says:
At a post-campaign discussion I attended a few months ago, Schmidt said that he regrets two attacks: an ad linking Obama with an Illinois sex-ed program and the decision to go after Obama's friendship with Ayers.
The Illinois sex-ed ad - the one Schmidt regrets - was largely true.