Recently, a large increase in the equilibrium hydrogen pressure has been reported for MG thin films capped with a Pd layer. We show that this increase is due to intermixing of Mg and Pd, as opposed to a strain effect as previously claimed. Transmission electron microscopy and depth profiling x-ray photoemission spectroscopy are used to directly measure interfacial intermixing between Mg and Pd, and we find that intermixing and equilibrium hydrogen pressure both increase with annealing. We present a thermodynamic model of the effect of alloying on equilibrium pressure, and find that the observed equilibrium pressure increase is consistent with the observed thickness of the intermixed region, which is of the order of a few nm. We also show that stress measured during hydrogenation corresponds to a negligible increase in equilibrium pressure.