The Sea Palace is actually pretty cool if you can get into it for what it is.
It is not peaceful Caribbean tranquility, but neither are any of the resorts around Simpson Bay or Maho.
An older dowdy place right on the water, right downtown, plenty to walk to and see, (no parking for a car) great shopping, great restaurants, close to the bus stop.
Just speaking personally, I can't take the entire western end of St. Maarten, Simpson Bay, Maho, etc. There is nothing exotic or different about it. Boring concrete sprawl.
At least Downtown Phillipsburg is utterly different than anything I can see in the States.
That being said, I can sure understand why people don't like it. I do.
My SXM list:
1. Cottages de Lonvilliers (finest location, IMO)
2. Divi (best combination of location and accomodations)
3. Belair (3rd best location, decent digs)
4. Sea Palace (only the funky and weird need apply)
But I'm weird. Everything else on the island is either too developed or too far away from anything and nothing to do.