I have been taught in school that atoms cannot have more than 8 electrons in the outer shell. Palladium atom's electron configuration is 2,8,18,18. Why isn't it 2,8,18,17,1 like the case of Platinum 2,8,18,32,17,1 or Nickel 2,8,17,1 and they are all in the same group?

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What they teach at school level isn't quite the whole truth. Have a read if this wiki page and then see if you have further questions. en.wikipedia.org/wiki/Atomic_orbital – qftme Jun 13 '11 at 0:52
Thank you very much @qftme. Actually the table in the "Orbital Energy" section in the wiki page says that the energy of 5s is 9 and the energy of 4d is 10. AFAIK the electrons fill up sub-shells from low to high energy. Also the section named "Electron placement and the periodic table" says that 5s is before 4d. This is also what I have been taught. This is still confusing to me. What am I missing ? – M.Sameer Jun 13 '11 at 19:00
Dear M.Sameer: It seems that you are missing that the $n+\ell$ Madelung rule is not an exact result derived from first principles, but rather a rule of thumb, that holds for, say, approximately 95 percent of all the elements, with important exceptions, cf. this wikipedia page. Nevertheless, there are semi-rigorous theoretical arguments why such a rule of thumb should hold to a good approximation. – Qmechanic Jun 13 '11 at 22:53
For me, your comment seems to make your original question clearer and more answerable. To which end, I agree with what @Qmechanic has written above (+1.) – qftme Jun 14 '11 at 14:47
It's the first time I know that the n+ℓ is a rule of thumb. It's the first time I know it has a name also :D . The wiki article is good too. Thank you very much @Qmechanic and @qftme. Shouldn't the comment be converted to an answer to be accepted and handled properly. – M.Sameer Jun 14 '11 at 22:27

Dear M.Sameer: It seems that you are missing that the $n+\ell$ Madelung rule is not an exact result derived from first principles, but rather a rule of thumb, that holds for, say, approximately 95 percent of all the elements, with important exceptions, cf. this wikipedia page. Nevertheless, there are semi-rigorous theoretical arguments why such a rule of thumb should hold to a good approximation.
That isn't true. The $5s$ orbital (usually) has a lower energy than the $4d$, so electrons will start filling the $5s$ orbital before they start filling the $4d$ orbital. – John Rennie Feb 28 at 6:42