I don't really think that making up crazy stuff about the health care bill to rile up the base is a very smart strategy for GOP leaders; normal distortions and extrapolations should do the job, and they're a lot less likely to backfire. More on that later, I think.
Now that the Sage of Wasilla has joined the fray, however, I think the Democrats have a real opportunity: Joe Biden should challenge her to debate health care. Sure, Biden is prone to saying nutty things himself, but the odds are very good that he'd reinforce the main Democratic themes at her expense. With a pretty good size audience.
Would she accept? I have no idea -- her past behavior patterns are, to put it the nicest way possible, not indicative of a full acceptance of enough of the norms politicians follow to allow for good prediction. If reports of her history of debate (and general) prep are accurate, however, there's a pretty good chance that she'd show up with relatively little accurate information about the bill or the issue, and it shouldn't be hard for a pro such as Biden to be prepared for the cliches that she would throw at him.
Of course, such a sideshow wouldn't magically change anything (although it might do serious damage to Palin's standing with GOP leaders if she did poorly, and of course help her if she did well). The obvious model, the Gore/Perot debate over NAFTA, wasn't really the reason NAFTA passed, either. I do think it would be a marginal plus with public opinion overall, and potentially a solid plus inside the beltway.