Dremel to the rescue!
Looking at the case and the location of the jack on the Palm, I knew that it shouldn't be too difficult to modify the case for an earphone plug if I could get my hands on a Dremel. It turns out that my buddy Steve had one and was willing to lend it to me. Let the modding begin....
Using a 7mm cutting bit, I roughed out the opening until the Sharpie lines were gone. I then switched to the 14mm sanding drum to gently smooth things out. On my case the base of the arc is roughly flush with the plastic of the case back. When I was using the drum, I angled it down slightly toward the outer edge to remove the lip. After the Dremel, I chipped off th melted plastic that had accumulated and used some 200 grit sandpaper to smooth things out. A little polishing with 000 steel wool and I was done! (mostly)