Hey Alexwebb2,
I've done some relatively extensive testing and have a few bugs and possible corrections for you.
Firstly though, what do you mean by 'diplo menu' because I've looked in all the diplomacy related menu things I can think of and the only place I see it is in the 'Additional Information' tab under Tech Tree and above Victory conditions.
Is it meant to be displaying elsewhere?
Secondly, you talked about moving onto the Palace from Civ 1, I was under the impression you were talking about the Civ 3 palace in the other thread (I might just comment in there instead as it seems a better place) - I think the Civ 3 palace would be more popular and just better in general, I think Civ 1 is a bit too far back for a lot of players
The Bug(s)
1. The main bug and probably the only true 'bug' is that the order of upgrades seems messed up and the mousing over them reveals uncertain results.
Basically, and this might be better explained with screenshots that I can provide if you want - when you mouse over say, the Throne itself (the rock thing at the start), it becomes the next upgrade, the chair. However should you click that, exit and come back in on that turn, it often appeared as something else, say the next upgrade along. A few turns on it is either still that 'level 3' throne instead of level 2 or it is now the level 2 chair.
Also when hovering over some objects at the start (the first time you enter the throne room) they simply appear black, to be nothing at all. You click them to upgrade and they still appear black. Exit the screen and come back in, it now shows as it should, or again, shows as a different level upgrade.
To complicate matters with this bug, and I'll try and simplify it since I'm not using screenshots right now: sometimes something leveled up reverts back to what it probably should have been if another aspect of the throne room is changed.
So for example:
I change the floor to lvl 2 (it turns black, exit menu, come back in, its now lvl 3)
I change the walls to lvl 2 (they appear as lvl 3 when moused over, clicked, exit out, back in, they now appear as lvl 2)
Move on a few turns: the throne and walls are now both lvl 2
Change the drapes to lvl 2 (now it just gets weird, some things moused over are either dark or lvl 3 or lvl 2, upon clicking it, it either changes the wall and throne back to lvl 3 or does it correctly.
That is the general idea of the bug, I'll post up screenshots if that'd be more helpful, after all I'm trying to help you debug it, not make it worse with misleading or confusing reports.
Potential Corrections/Improvements
1. The 'notification icon' for the throne room upgrade should be clickable, and upon being clicked, move you into the throne room window. Right now, clicking the notification does nothing - this would help it fit in more with the current notification setup.
2. 'Lock' the throne room screen, so that any keys/buttons pressed don't do anything to the game behind it. Currently if you press 'Enter' on the throne room screen it goes to the next turn (if at the end of your turn). At the same time, add in that the ESC key and ENTER key both exit the window. This would bring it in line with the current setup used by the game.
3. Make the Upgrade mandatory. You know how if you have a free tech to select or something to construct the 'Next Turn' button turns into a different colour and prompts you for that action? This would be perfect here for a couple of reasons; it looks better, plain and simple; it removes any confusion of 'stacked' upgrades, did I miss an upgrade? That kind of thing. It also reminds you to look at your shiney Throne Room.
4. New Icon Art for the notification Icon, I suggest black background, yellowish foreground, keeping it somewhat in line with the other icons of that ilk like Golden Age, Faith and so on. I'm probably willing to make said Icon if you'd like to be doing something else, depends on how much time I have and if you want the help etc.
5. Different sound for the notification, maybe the 'New Era' sound effect triggered when moving from one Era to the next. It's a nice dramatic sound, but not very common and so won't confuse players too much.
6. The icon at the top of the throne room is the US symbol, maybe best to pick something less Civ-specific, if you or I or whoever makes a throne room notification icon, this would do nicely. In the mean time I'd use something else just generic.
7. I would change the sound effect for clicking on an upgrade, make it sound more 'final' or dramatic or polished etc - I would use the 'buy plot' or 'buy unit/building' sound. It isn't clear at first you've 'purchased' the upgrade, it makes a very neutral clicking sound and that's it. Either that, or allow the person to click on the upgrade, see the throne room as it would look (no upgrades flashing on and off etc) and have a 'Confirm Upgrade' button on the lower right of the window opposite the 'back' button that makes the 'buy thing' sound and confirms your upgrade. I know it sounds like nitpicking

it's just my opinion.
That's everything, I know it was only a beta release so I'm sure you didn't have time to implement everything you might have done for polish etc but I wanted to get my view in there first

just in case you liked any of the ideas or wanted any help etc.
Other than that I enjoyed it, the suspense over 'potential' upgrades is very good. I don't know if you weighted them more in favour of likely upgrades with some things rather than others but if not I think Golden Ages and Era changes should have the most likelihood with Wonders next most likely, and lastly Social Policies.
You've implemented it really well, it looks very classy and generally fits in with the rest of the game seamlesslly. I like where you've placed it in the menu I think. Good work, I'd fix this stuff though before moving onto the Palace too much, and hey I hope it is the Civ 3 palace! Or at the least the Civ 3 palace could also be done
Anyway, hope the feedback helps.
-Mars