diff --git a/pcsx2/GS/GSExtra.h b/pcsx2/GS/GSExtra.h
index 9723c8986d..44fde2e8dc 100644
--- a/pcsx2/GS/GSExtra.h
+++ b/pcsx2/GS/GSExtra.h
@@ -114,10 +114,11 @@ extern Pcsx2Config::GSOptions GSConfig;
 
 // Maximum texture size to skip preload/hash path.
 // This is the width/height from the registers, i.e. not the power of 2.
+static constexpr u32 MAXIMUM_TEXTURE_HASH_CACHE_SIZE = 10; // 1024
 __fi static bool CanCacheTextureSize(u32 tw, u32 th)
 {
-	static constexpr u32 MAXIMUM_CACHE_SIZE = 10; // 1024
-	return (GSConfig.TexturePreloading == TexturePreloadingLevel::Full && tw <= MAXIMUM_CACHE_SIZE && th <= MAXIMUM_CACHE_SIZE);
+	return (GSConfig.TexturePreloading == TexturePreloadingLevel::Full &&
+			tw <= MAXIMUM_TEXTURE_HASH_CACHE_SIZE && th <= MAXIMUM_TEXTURE_HASH_CACHE_SIZE);
 }
 
 __fi static bool CanPreloadTextureSize(u32 tw, u32 th)
diff --git a/pcsx2/GS/Renderers/HW/GSTextureCache.cpp b/pcsx2/GS/Renderers/HW/GSTextureCache.cpp
index 3ade5bd273..b450426996 100644
--- a/pcsx2/GS/Renderers/HW/GSTextureCache.cpp
+++ b/pcsx2/GS/Renderers/HW/GSTextureCache.cpp
@@ -1545,7 +1545,7 @@ GSTextureCache::HashCacheEntry* GSTextureCache::LookupHashCache(const GIFRegTEX0
 	// don't bother hashing if we're not dumping or replacing.
 	const bool dump = GSConfig.DumpReplaceableTextures && (!FMVstarted || GSConfig.DumpTexturesWithFMVActive) &&
 					  (clut ? GSConfig.DumpPaletteTextures : GSConfig.DumpDirectTextures);
-	const bool replace = GSConfig.LoadTextureReplacements;
+	const bool replace = GSConfig.LoadTextureReplacements && GSTextureReplacements::HasAnyReplacementTextures();
 	bool can_cache = CanCacheTextureSize(TEX0.TW, TEX0.TH);
 	if (!dump && !replace && !can_cache)
 		return nullptr;
@@ -1604,25 +1604,36 @@ GSTextureCache::HashCacheEntry* GSTextureCache::LookupHashCache(const GIFRegTEX0
 			const HashCacheEntry entry{replacement_tex, 1u, 0u, true};
 			return &m_hash_cache.emplace(key, entry).first->second;
 		}
-		else if (replacement_texture_pending)
+		else if (
+			replacement_texture_pending ||
+
+			// With preloading + paltex; when there's multiple textures with the same vram data, but different
+			// palettes, if we don't replace all of them, the first one to get loaded in will prevent any of the
+			// others from getting tested for replacement. So, disable paltex for the textures when any of the
+			// palette variants have replacements.
+			(paltex && GSTextureReplacements::HasReplacementTextureWithOtherPalette(key)))
 		{
-			// we didn't have a texture immediately, but there is a replacement available (and being loaded).
-			// so clear paltex, since when it gets injected back, it's not going to be indexed
+			// We didn't have a texture immediately, but there is a replacement available (and being loaded).
+			// so clear paltex, since when it gets injected back, it's not going to be indexed.
 			paltex = false;
 
-			// if the hash cache is disabled, this will be false, and we need to force it to be cached,
+			// If the hash cache is disabled, this will be false, and we need to force it to be cached,
 			// so that when the replacement comes back, there's something for it to swap with.
 			can_cache = true;
 		}
-		else if (paltex)
-		{
-			// there's an edge case here; when there's multiple textures with the same vram data, but different
-			// palettes, if we don't replace all of them, the first one to get loaded in will prevent any of the
-			// others from getting tested for replacement. so, disable paltex for the textures when any of the
-			// palette variants have replacements.
-			if (GSTextureReplacements::HasReplacementTextureWithOtherPalette(key))
-				paltex = false;
-		}
+	}
+
+	// Using paltex without full preloading is a disaster case here. basically, unless *all* textures are
+	// replaced, any texture can get populated without the hash cache, which means it'll get partial invalidated,
+	// and unless it's 100% removed, this partial texture will always take precedence over future hash cache
+	// lookups, making replacements impossible.
+	if (paltex && !can_cache && TEX0.TW <= MAXIMUM_TEXTURE_HASH_CACHE_SIZE && TEX0.TH <= MAXIMUM_TEXTURE_HASH_CACHE_SIZE)
+	{
+		// We only need to remove paltex here if we're dumping, because we need all the palette permutations.
+		paltex &= !dump;
+
+		// We need to get it into the hash cache for dumping and replacing, because of the issue above.
+		can_cache = true;
 	}
 
 	// if this texture isn't cacheable, bail out now since we don't want to waste time preloading it
diff --git a/pcsx2/GS/Renderers/HW/GSTextureReplacements.cpp b/pcsx2/GS/Renderers/HW/GSTextureReplacements.cpp
index 22621d8bb5..908b4d5f9d 100644
--- a/pcsx2/GS/Renderers/HW/GSTextureReplacements.cpp
+++ b/pcsx2/GS/Renderers/HW/GSTextureReplacements.cpp
@@ -333,8 +333,18 @@ void GSTextureReplacements::ReloadReplacementMap()
 		s_replacement_textures_without_clut_hash.insert(name.value());
 	}
 
-	if (GSConfig.PrecacheTextureReplacements)
-		PrecacheReplacementTextures();
+	if (!s_replacement_texture_filenames.empty())
+	{
+		if (GSConfig.PrecacheTextureReplacements)
+			PrecacheReplacementTextures();
+
+		// log a warning when paltex is on and preloading is off, since we'll be disabling paltex
+		if (GSConfig.GPUPaletteConversion && GSConfig.TexturePreloading != TexturePreloadingLevel::Full)
+		{
+			Console.Warning("Replacement textures were found, and GPU palette conversion is enabled without full preloading.");
+			Console.Warning("Palette textures will be disabled. Please enable full preloading or disable GPU palette conversion.");
+		}
+	}
 }
 
 void GSTextureReplacements::UpdateConfig(Pcsx2Config::GSOptions& old_config)
@@ -378,6 +388,11 @@ u32 GSTextureReplacements::CalcMipmapLevelsForReplacement(u32 width, u32 height)
 	return static_cast<u32>(std::log2(std::max(width, height))) + 1u;
 }
 
+bool GSTextureReplacements::HasAnyReplacementTextures()
+{
+	return !s_replacement_texture_filenames.empty();
+}
+
 bool GSTextureReplacements::HasReplacementTextureWithOtherPalette(const GSTextureCache::HashCacheKey& hash)
 {
 	const TextureName name(CreateTextureName(hash.WithRemovedCLUTHash(), 0));
diff --git a/pcsx2/GS/Renderers/HW/GSTextureReplacements.h b/pcsx2/GS/Renderers/HW/GSTextureReplacements.h
index 46c2a60cc2..110fcb5e94 100644
--- a/pcsx2/GS/Renderers/HW/GSTextureReplacements.h
+++ b/pcsx2/GS/Renderers/HW/GSTextureReplacements.h
@@ -44,6 +44,7 @@ namespace GSTextureReplacements
 
 	u32 CalcMipmapLevelsForReplacement(u32 width, u32 height);
 
+	bool HasAnyReplacementTextures();
 	bool HasReplacementTextureWithOtherPalette(const GSTextureCache::HashCacheKey& hash);
 	GSTexture* LookupReplacementTexture(const GSTextureCache::HashCacheKey& hash, bool mipmap, bool* pending);
 	GSTexture* CreateReplacementTexture(const ReplacementTexture& rtex, const GSVector2& scale, bool mipmap);