The glare of publicity has made Frank (Blinky) Palermo blink and back off from his application for a license to manage boxers in Pennsylvania.

The three-member State Atheltic Commission on Feb. 2 heard the request of Palerno, 73, for sanction in the game in which he was a power before being sent up, with the late underworld boxing czar Frankie Carbo, on a 1961 conviction for extorting earnings from welterweight champion Don Jordon. Yesterday in Philadelphia the 7 1/2-year veteran of federal prison (paroled in 1971) went before the commission and withdrew the application.

Palermo's lawyer, Robert Gabriel, declaimed, "This . . . has in effect been determined in trial by the news media. Because of the horrendous newspaper publicity which has literally destroyed his character, reputation and credibility, Mr. Palermo feels he cannot effectively promote the good interests of the boxing profession. He further recognized that no single individual can in fact stand up to the awesome power of the press."

From behind rose-colored dark glasses, Palermo said, "I paid my debt to society, so what do they want?" - and that he would continue working with young fighters at a boys club in his hometown Philly, as he has done for six months. "My main thing is to get the kids off drugs," he said . . .