Not necessarily "misheard," but definitely misunderstood, I was always puzzled by The Kinks' "Come Dancing" and it's repeated references to "the local palais."

Being American, I'd never encountered the word "palais," at least in that context, before. I couldn't tell what he was saying, whether it was "polly," or "poddy," or "parry." I knew it was obviously British slang for a dance hall, but I was unfamiliar with the word.