As of version 3.0 the item restrictions have been greatly reduced. Any item can conceivably be found in any position, as long as you are able to get the other spells and items required to get there. The main exception is the raft, which will always be in the west for obvious reasons.
The randomizer will examine palaces to see which items or spells are needed to acquire the item. For example, sometimes the item in palace 3 will be glove blocked, but it will be possible to acquire it without the glove in some seeds. The randomizer will check for this and will be aware that you are able to get that item without the glove.
You do need to have a way of getting through key doors before entering a palace, i.e. you need to have either the fairy spell or the magic key.