Here's the video, this diary at Daily Kos. It's pretty clear what the person off camera says.
Some people have been claiming that Palin, because she hesitates for a split second after the yell and stumbles over her next sentence or so, heard this and decided to ignore it. That's possible, I guess, but I don't see any body language that suggests that she definitively understood what the person said. There was no head movement toward the sound, no upward glance--nothing. Just a hitch in her voice, and frankly, it's not like she'd been particularly smooth leading up to that moment, and what followed was about as disjointed a piece of rhetoric as we've come to expect from Governor Palin. I tend to follow the NFL's instant replay rules on this sort of thing--I give the benefit of the doubt unless there's definitive evidence contradicting this, and based on this footage, I don't think there's definitive evidence that Palin 1) heard the n-bomb and 2) decided to pretend like it didn't happen.
That said, did you notice who else didn't react? There was no indication--no rumble from the crowd, for example--that the people next to the person who yelled the n-bomb had much of an objection to it. Now I can understand that situation--maybe you're uncomfortable about confronting strangers about racism. But there was no one in that crowd who objected loudly enough to be picked up by the microphones. Try calling Governor Palin a c*** at an Obama rally and see how quickly someone in the crowd will shout you down, assuming the speaker doesn't hear it and call you out for it. But that didn't happen here, and that is the saddest part of this story.
The big news--though I suspect it's less of a big deal than the headline akes it out to be--is the disruption of a plot by some Neo-Nazis to rob a gun store and then go on a killing spree at a high school populated largely by African-American students, and then somehow manage to get within shooting range of Barack Obama and kill him as well. That sounds more like the Liberty City Seven kind of planning than anything else, but I expect we'll see more of this in the coming years, not to mention a resurgence of n-bombs by angry white people who can't deal with a black president.