The cut Palin out for whatever reason. Perhaps too crazy even for this show. But they credited her as "Special Publicity Consultant"
Now I'd like to think that it would be harder to find victims for the second season... but then again, Cohen has been doing pranks for years so I bet he could fool some of the same people once more if he just put a different jacket and sunglasses on.
She probably didn't sign the release waiver to allow them permission to use the footage. A lot of people refuse to sign it, but the producers just offer you more and more money until you figure it's better just to take the hit and the cash. Palin doesn't need money and not for the embarrassment it obviously would have caused her so she probably didn't sign it and/or even threatened to sue.
I'm not sure if there will be a second season, but if there is maybe he will use all new characters. There was one character that was cut out of this season and he got recognised by someone he was trying to prank straight away:
https://www.youtube.com/watch?v=iKVwkU2RI4s