No, it has nothing to do with palace build time. The player in question changed his capital to his first hammer village 2 hours before the reals, so he would have plenty of time to rebuild palace in his second hammer (i.e. he did it as soon as he had switched cap to his first hammer village). He then waited for 8-10 seconds after the attacks on his first hammer, and swapped cap to his second hammer, but the first hammer was chiefed anyway.
So the village that he changed cap to 2 hours before hits got chiefed? How will the 1 hour restriction even help then?