I had to craft an LSystem (the code that governs exactly how the buildings are laid out on the map) specifically for the Palisade, and it uses a very unusual piece of code (szSpecialLayout:CitySurround) to make the Palisade grow with the city. Palisade does not work the same way as Walls. Walls are built from a collection of wall, post, and gate segments while the Palisade is one unit that scales up with city size. I guess Palisade doesn't work very well with Wonders with unique layouts; I think I was able to reproduce what you saw in WorldBuilder, and I got the same effect with the Great Lighthouse, plus an even more spectacular size growth if I WB in Space Elevator (not that this will ever happen in game, but it was interesting to see). So the city "space" that the Palisade is trying to surround winds up extending just out to the Colossus/Lighthouse, and that is how you get the supersize Palisade. The only alternative appears to be locking down the size of the Palisade when it's built, but then you have to either have a really large Palisade to start and a lot of empty space, or a Palisade with buildings poking through. I don't know which is the better alternative.