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Even I was in such a quandry earlier, but with my monthly running of ~1500 kms i'll be going in for a diesel. However i'm finding waiting for the Palio MJD launch a little painful.
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Hi Elfhelm,
I too think the 1.6 petrol wd be a better option but still awaiting more expert views n research.
Btw...the Palio 1.3 MultiJet is gonna launch in March'08. This is a confirm news from Fiat marketing dept

So you can i think wait for a month...
Cheers~