What happens with palace guard and other blockers?
For each blocking creature, you choose the order of the creatures that it is assigning damage to. So, for your palace guards, you have 4 total options:


Palace Guard 1 and Palace Guard 2 both assign damage to Bear 1 first.
Palace Guard 1 and Palace Guard 2 both assign damage to Bear 2 first.
Palace Guard 1 assigns damage to Bear 1 first, Palace Guard 2 assigns damage to Bear 2 first.
Palace Guard 1 assigns damage to Bear 2 first, Palace Guard 2 assigns damage to Bear 1 first.


If you choose either #1 or #2, you will do 2 damage to 1 Bear and kill it, while not touching the other Bear. If you choose #3 or #4, you will do 1 damage to each Bear, and not kill anything.

Also, for each attacking creature Your opponent gets to choose the order that your blocking creatures will take damage, so he also has 4 total choice:


Bear 1 and Bear 2 both assign damage to Palace Guard 1 first.
Bear 1 and Bear 2 both assign damage to Palace Guard 2 first.
Bear 1 assigns damage to Palace Guard 1 first, Bear 2 assigns damage to Palace Guard 2 first.
Bear 1 assigns damage to Palace Guard 2 first, Bear 2 assigns damage to Palace Guard 1 first.


Similar to your choices, if he chooses #1 or #2, he will deal 4 damage to 1 Palace Guard and kill it; if he chooses #3 or #4, he will deal 2 damage to each Palace Guard and won't kill anything.


  509.2. Second, for each attacking creature that’s become blocked, the active player announces that 
  creature’s damage assignment order, which consists of the creatures blocking it in an order of that 
  player’s choice
  
  509.3. Third, for each blocking creature, the defending player announces that creature’s damage 
  assignment order, which consists of the creatures it’s blocking in an order of that player’s choice. 


The key here is that players get to choose separately how each attacking creature (and each blocking creature) orders/assigns its damage.