Yes I puzzled over the same issue you have till I concluded that it must mean that: the player who chose the Craft power would choose a character and perform the associated action before anyone else would chose a character. So at the beginning of Phase ll [Players Actions] the Craft winner simply chooses a character and does the action NOT picking a card. A free recruiting action; as they state "This recruitment is free".
We played this way also. However, we found this power was far and away the most attractive of the four available. To the point that no other power was selected by the first chooser throughout the game. The second chooser always went for the end of round procession cube in a monastery. That left a choice of the same two every time for the third chooser.
I'm concerned that the Palace is simply a money sink with no real choices, and that you simply have to pay to compete to get that free action which is so powerful, and I think I might prefer the base game.