For MUGEN 1.0 or 1.1 you can have more than 12, but you will need custom palette selection coding to use them.
Basically, you need one or more RemapPal controllers that respond to input.
You can also log the current Pal as a Var, then add/subtract from that Var to affect the RemapPal
For example in my character...
Spoiler: In State 5900 Round Initialization (click to see content)
[State 5900, Apply Pal]
type = RemapPal
trigger1 = var(57)
source = 1,1
dest = 1,var(57)
Spoiler: In Intro Poses (click to see content)
[State 191, Change Jailbot Pal]
type = RemapPal
trigger1 = var(57)
source = 1,1
dest = 1,var(57)
And then to actually change the pals you just need to include a VarSet or VarAdd such as:
[State 191, Up]
type = VarAdd
trigger1 = command = "fwd"
var(57) = Cond(var(57) = 27,-26,1)
[State 191, Down]
type = VarAdd
trigger1 = command = "back"
var(57) = Cond(var(57) = 1,26,-1)
Note how it does different math when the number is at 1 or 27.