McAllister has been trying to negotiate a deal with Palace for the 33-year-old former Scotland international to come to Elland Road.
He said on BBC Radio Leeds: "I'm speaking to Neil Warnock quite a bit about Dougie Freedman. He falls into that category of the type of player that I want to try and bring here."
But McAllister admits that if Freedman comes in, some players would have to go out on loan.
"I've got a big squad, probably the biggest in the league. There's a few that we're looking to go the other way, that's what happens.
"It's just the numbers game, two come in and maybe two, three or four might have to go the other way," he said.