“We grow good people in our small towns, with honesty and sincerity and dignity,” she said, drawing from a once-powerful, now forgotten mid-century conservative columnist named Westbrook Pegler.
It’s an odd source because Pegler, who moved further right as his career went on, ended up very, very far out. Frank notes that he talked hopefully of the assassination of Franklin Roosevelt.
He was also known for what Philip Roth described as his “casual distaste for Jews,” which had become so evident by the end that he was bounced  from the journal of the John Birch Society in 1964 for alleged anti-semitism. According to his obituary , he’d advanced the theory that American Jews of Eastern European descent were “instinctively sympathetic to Communism, however outwardly respectable they appeared.”
It’s unlikely that Palin wrote the speech or dug up the quote, though it’s possible. The line does come from a strand of conservative populism that isn’t particularly native to McCain or his usual rhetoric: The only other source for that Pegler easily available online is a 1990 book  by Patrick Buchanan.
In any case, it won’t calm Ed Koch any.