Andrea Nill at ThinkProgress does point out that, in fact, the DREAM Act perfectly fits Palin's description:

Actually, the DREAM Act aims to accomplish precisely what Palin described. Under the DREAM Act bill that Republicans killed last December, applicants would have had to go through a rigorous process of background checks, in addition to paying taxes, learning English, and either serving in the military or attending college. They would have then received a “conditional nonimmigrant” status and would be required to “stand in line” for ten years before being granted legal immigrant status. The Congressional Budget Office estimated that the same bill would reduce the deficit by $1.4 billion over ten years.

Today's Republicans are so deeply in the thrall of their nativist wing that they can't even bring themselves to endorse a common-sense piece of immigration legislation like the DREAM Act. Instead, they succumb to the pack of lies that the nativists sell.

They will regret this deeply, and soon. I'm looking forward to seeing Sarah Palin trying to sell her "Latino outreach" in the 2012 election. Bet it goes over about as well as Sharron Angle's ill-fated stab.