Feeding the rumors was MacWorld, where Steve Jobs introduced Palm CEO Carl Yankowski by saying that Apple had been "doing a lot of work with these guys lately." Nothing has been confirmed, but sources are now saying that there is a prototype of an Apple-branded Palm-compatible that is a combination of the Palm V and the Handspring Visor that will reportedly have the Palm V form factor, a color screen, an expansion slot, and be compatible with the Airport wireless technology.
Please remember that this is pure speculation at this point. Any Apple-Palm handheld would most likely be announced around summer.
Update: Ludo posted in the Discussion area this link to an artist's conception of the Apple Palm-compatible.