I got a Model Two for Christmas and love it. It does have a "recording out" which serves as a line output. I don't know about the PAL. From what I have read, the Model One only has a mono output, even through the headphone out, while the PAL and Model Two do put out stereo. My Model Two does not have the drifting issue I have seen a few people describe and performs quite well and sounds great. I can leave it set on a station before I go to bed and the next day it has not drifted at all.
From what I have read, the biggest notable difference, other than the obvious portability of the PAL, is that the PAL has a slightly smaller speaker than the Model One. Most reviews don't seem to point to a vast difference between the two. Given that radio receivers tend to perform better on battery power than on AC power due to power supply noise issues, assuming the attached antenna and the receiver portion of the radios are the same, the PAL may perform better reception-wise compared to the Model One.
Given that quality-control issues do seem to surface in more than a handful of these radios, whether you get a PAL or a Model One it's probably best to get one from a local retailer with a good return policy just in case. Hopefully you'll get a good one as I did, and if not, at least it'd be easy enough to exchange it for another one.