Electrode poisoning by CO is a major concern in fuel cells. As interest in applying computational methods to electrochemistry is increasing, it is important to understand the levels of theory required for reliable treatments of metal-CO interactions. In this paper we justify the use of relativistic effective core potentials for the treatment of PdCO and hence, by inference, for metal-CO interactions where the predominant bonding mechanism is charge transfer. We also sort out key issues involving basis sets and we recommend that bond energies of 17.2, 43.3, and 69.4 kcal/mol be used as the benchmark bond energy for dissociation of Pd2 into Pd atoms, PdCO into Pd and CO, and Pd2CO into Pd2 and CO, respectively. We calculated the dipole moments of PdCO and Pd2CO, and we recommend benchmark values of 2.49 and 2.81 D, respectively. Furthermore, we tested 27 density functionals for this system and found that only hybrid density functionals can qualitatively and quantitatively predict the nature of the σ-donation/π-back- donation mechanism that is associated with the Pd-CO and Pd2-CO bonds. The most accurate density functionals for the systems tested in this paper are O3LYP, OLYP, PW6B95, and PBEh.