I don't think of Palpatine as being rabidly insane. If we allow for Legends material, Thrawn shows that he was willing to be to some extent pragmatic with aliens. Anyway, his master was a Muun.
If it wasn't a personal bias, he must have thought that the anti-alien sentiment would enhance his power. But telling the majority of the galaxy that they suck seems a poor way to gain power.
Unless all the resources he took advantage of came from people who were already anti-alien, and it was easiest to just go along?
Answer
Every good dictator likes a convenient scapegoat, with the demise of the separatist who could Palpatine blame when things go wrong? That's right those nasty aliens!
It has happened in the real world plenty of times Hitler and the Jews or Stalin and the Gypsies.
Also a good way for a dictatorship to keep its opponents separated is to sew seeds of distrust, hatred and differences amongst the populace.
If humans get all the high powered jobs and the aliens are treated as scum the humans are going to be happy and want to keep their privileges so will do what they can to keep the aliens down.
The Emperor's almost secret use of aliens that can be of use to him, such as Grand Admiral Thrawn, will allow this perceived superiority of humans within the Empire to continue, without Palpatine being totally surrounded by incompetent people.
If the aliens are kept down they are going to have less resources and chances to effectively rise up.
The xenophobia may even extend to other species, for example the Quarren and the Mon Calamari, stopping them from uniting against the empire.
Obviously in the end this didn't work with the inclusive Rebel Alliance (Sullustans, Mon Calamari, Wookiees and Humans with a little bit of Bothan help) eventually defeating the Humanocentric Empire.
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