Poe incorporated "The Haunted Palace" into his story "The Fall of the House of Usher," and it's meant as an expression of the decay of Roderick Usher's family and the family home. One wonders, however, if it could fit just as easily into other stories of Poe. Most of his verse seems less to convey specific meanings and more to create a general mood of horror. There also is an emphasis on sheer sound, the kind of musical beauty Poe sees as a poetic ideal and which relates to Roderick Usher's character as well. (You might want to read Poe's essay "The Poetic Principle" for more on his aesthetic ideal.)
Look at the fourth stanza, beginning with "And all with pearl and ruby glowing . . ." The third line, with its repetition of "flowing," has an effect similar to that which Poe creates in "The Bells." In both poems we see an obsessive quality that separates us from the real world and its clear-cut meanings and rationality.
It wouldn't be much of an exaggeration to say the entire poem makes relatively little conventional sense and is arresting not in spite of this but because of it. For instance, the sudden intrusion of the word "Porphyrogene," taking up a whole line and meaning "royal," throws the reader off balance in its strangeness. The description of the "troop of Echoes" whose "sweet duty was but to sing" reveals something similar to Poe's titular figure in "Annabel Lee," whose only task was "to love and be loved by me." And why would these "Echoes," wood nymphs of mythology, be flowing through the doorway of the house? More questions than answers are given to us by Poe.
The poem's musical effect, its enigmatic, nebulous quality, and its narcissism (in saying these "flowing, flowing, flowing" Echoes have no purpose but to extol the king) are all an expression of Roderick Usher's character, but also of Poe's. Like many of Poe's stories, the poem is suggestive of mental illness, of psychosis. In the final stanza, the throng laughs "but smile no more." Why? What is it that this tells us about the mental state of the throng, and of Poe himself? What would cause amusement but also the lack of happiness, the absence of anything to smile about?