I don't understand why you think multi-touch is obvious or unpatentable. Prior to the iPhone, were multi-touch consumer touchscreen devices well-known?
To answer your second question: No, among Apple's customers and prospects, a patent lawsuit will tarnish Palm, not Apple.
Furthermore, during the development of the iPhone, Apple was very much aware of the history of multi-touch, dating at least back to 1982, and the use of the pinch gesture, dating back to 1983. This is clearly demonstrated by the bibliography of the PhD thesis of Wayne Westerman, co-founder of FingerWorks, a company that Apple acquired early in 2005, and now an Apple employee:
In light of that one might conclude that while multi-touch might not be new technology, the specifics of Apple's patent claims may very well be.
Besides shouldn't the idea by itself of taking a single touch input device and making a multiple touch input device be the very definition of obvious. How they actually built the multi touch input device is a different matter.
To answer your second question: No, among Apple's customers and prospects, a patent lawsuit will tarnish Palm, not Apple.