I stayed at Bavaro Palace last spring. We had planned on staying at the Bavaro Beach, however, when we arrived the Beach hotel was overbooked and everyone on our flight was upgraded to the Palace for free.
I personnally would not pay for the upgrade. The benefits of upgrading are: Slightly nicer rooms (two sinks in the bath instead of one and slightly nicer decor); Pool-side chairs at the Palace are cushioned, the ones at the Beach are not; The Pool area is larger and nicer at the Palace and there is also a swim-up bar; You get bottles of beer at the Palace and tap beer at the Beach; People staying at the Palace can get drinks anywhere, but people at the Beach can't get drinks at the Palace; There is also one restaurant at the Palace that only people staying at the Palace can go to, but only once per week; There are also more "grill" style restaurants on the grounds of the Palace.
I could not tell any difference in the buffets or the "grill" style restaurants in any of the areas. The beach is nice everywhere. My wife and I are already planning on going back. Enjoy.