Palmer had said in a written response to a senator that morale was low in Venezuela's military and there were "clear ties" between members of the Chavez government and leftist Colombian rebels.
The comments followed Colombia's accusation that Venezuela was sheltering guerrillas on its soil, allegations Chavez has denied before breaking off diplomatic ties with the neighbouring government.
|Larry Palmer had alleged "clear ties" between Venezuela and Colombian rebels [EPA]
Crowley said Caracas had earlier agreed to accept the Palmer's nomination by Barack Obama, the US president.
"We're certainly hopeful that we can assuage whatever concerns the Venezuelan government has. But he is still our nominee," he added.
Chavez, speaking on his weekly television programme on Sunday, asked the Obama administration to withdraw Palmer's nomination and "look for another candidate".
On Thursday the Venezuelan foreign ministry protested Palmer's statements as "interference and interventionism" and asked the United States for an explanation before he was confirmed in his post.
"[Palmer] disqualified himself by breaking all the rules of diplomacy. He messed with all of us. He can't come here as ambassador," Chavez said.
"The best thing the United States government can do is to look for another candidate [for ambassador to Venezuela]."
Palmer, who has served as ambassador in Honduras and charge d'affaires in Ecuador, was picked to try to manage the US' difficult relationship with Venezuela.