The problem is hardware-dependent, so there's not a lot to do if you have a graphics card that doesn't support ShaderModel 3. The simplest workaround would be not using the shader, which is the easiest way to fix it if you don't care about the palette swap system. If you do need it, though...
There's a bunch of workarounds discussed in this GMC topic, the original version of the shader didn't use a loop and thus were more compatible with older graphics cards at the expense of having a limit of 10 colors per palette: http://gmc.yoyogames.com/index.php?showtopic=58777...
The old GMC has been archived, but hopefully the info/code already in the topic helps.
There's also a new topic for the shader system here on the new GMC: https://forum.yoyogames.com/index.php?threads/retro-palette-swapper.7498/
(Not sure if it includes info about the old version of the shader anymore, though)