You're right in your guess that it has to do with ExAnimation. In the "Type" dropdown of the ExAnimation window, select one of the palette options near the bottom.
"
+ Working" means the game will copy the palette animation to RAM, which may fix a few issues with fading at the cost of a bit more processing time.
"
Stop on Fade", of course, means the animation will stop during the end level fade (otherwise, it won't fade correctly).
"
Back Area Color" is pretty self-explanatory.
For these options relating to these:
"
Destination" is the color number of the first color you want to animate in the palette table.
"
Colors" is the number of colors you want to animate; this gets a bit confusing if you set it to more than one, so for starting out I just recommend doing one color per animation slot. If you really need more than that, look at LM's help file for more information.
"
Frames" is how many colors you want to cycle through.
Lastly, the frame boxes are for the SNES RGB four-digit color values you want to use; just create the color in LM's palette editor and copy the value from there.
When you have all that put in
"
Palette Rotate ____" will shift a set of colors, looping back to the other side when they reach one end. It works a bit differently than the other options:
"
Colors" is the number of colors to rotate (usually no more than 0xF).
"
Destination" is the first color to rotate.
"
Frames" is how many frames to wait before rotating, minus one (i.e. 1=immediate, 2=every other frame...).
The frame boxes are ignored.
"
Rev on Trigger" is pretty self-explanatory, it'll cause the palette to rotate the other direction when whatever trigger you're using is set.
edit: ninja'd, but here's some more information I guess
Professional frame-by-frame time wizard.
YouTube -
Twitter -
SMW Glitch List -
SMW Randomizer