Swap which characters share palette

As far as I remember, Terra uses palette 2 (and only Terra). If you change palette 2, then set Setzer to use palette 2, yes palette 4 (Cyan and Setzer) will still use the default palette 4, since you only replaced palette 2.

But you will have to change Setzer's OAM data to use palette 2 as well, or else the sprite will still use palette 4 in shops and roster places.

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And yes, you'll have to change every instance of Setzer having a paleete set via event, as well as all NPC versions in a map editor.

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Palette change guide

There it is. The link for Runelancer's document has a list of event locations character palettes are set.

OAM:
D8/EAFE (aka 18/EAFE in an editor)
02 80 01 88 3D
80 11 8A 3D
D8/EB07:
02 80 00 8C 3D
80 10 8E 3D

Those 4 "3D" need to be changed to match Terra's "39" for palette #2.