Ambalu, a 21-year-old forward, has joined the Gulls from Midland League Division One side Heather St John's having had spells at Redditch United, Aylesbury and Dudley Town.
Palfry had agreed a month-long deal at the National League side.
He can play in defence or midfield and is a second-year academy player.
Torquay United have signed former West Bromwich Albion trainee Joel Ambalu and added Plymouth Argyle youngster Billy Palfry on loan.