The Palace does indeed still exist in splendor. I was in there on my last trip out, and they had some really great pictures taken of the building over the years hung in the Palace Restaurant. There was an arched door entry facing the North end of the Depot, and at the time I was there, you could still see bottom of the arch at the entrance to the kitchen.
Although it has changed many times over the years, I, too think of the Palace as an integral part of the Durango scene, and would second it's appearance in your painting.
Welcome back Coke.