The Newton, no matter how "awesome" some people may think it was, was a failed product. It lost money for Apple and they killed it. Steve Jobs is a smart businessman. He did the smart thing by killing off the Apple clones, killing the Newton, protecting Apple sales margins and moving to OS X.
There's no way in hell Jobs is going to rejoin the PDA market at a time when no one is making a profit ... unless, that is, if he can buy the #1 company in the market and leverage that market share into a family of portable devices that can strengthen sales of his core product line.
Palm's market cap right now is roughly $2 billion ... that's incredibly cheap for a company that still dominates the PDA market (despite heavy investments from deep pockets like Sony, Microsoft, Compaq, HP, etc.) What Palm lacks is innovation -- and that's Apple's expertise.