Clarke will return to Anfield for Monday's Barclays Premier League clash for the first time since he and Dalglish parted company with the Reds last summer after 18 months in charge.
He believes Dalglish signings such as Jordan Henderson, Stewart Downing and Jose Enrique are now showing their true worth after initially taking time to settle.
Clarke said: "I'm looking forward to it. I had a great 18 months at Liverpool, I made a lot of friends and I've got a lot of good memories from my time there.
"I liked the passion of the people. They are very fair-minded and honest supporters who wanted their team to be entertaining and do well.
"There was some success. There were two cup final appearances. One was victorious and one was a defeat and, if you add in the semi-final win over Everton, there were three good trips to Wembley for the supporters.
"Supporters enjoy big days out and big occasions and at a big club like Liverpool, you should be competing for all the major honours.
"I'm not surprised now at all some of the younger players are starting to flourish, or some of the more experienced ones that Kenny signed.
"It can take a period of time for people to settle into a club the size of Liverpool.
"For Stewart Downing to be in the team and Jordan Henderson, as well as Jose Enrique, and doing really well, is good.
"Luis Suarez has really settled into the club now and, if you look at it at this stage, Liverpool are probably playing the best football in the Premier League."
Clarke can see signs of Liverpool starting to flourish under Dalglish's replacement, Brendan Rodgers.
He said: "I don't think there's anybody in football now who thinks you just turn up at a club and create a good team just because they're a great, historical club.
"You have to work at it. Every club in the league has to work hard to try to put a good team on the pitch and you have to work as hard as you can with your players.
"Brendan went in there with a different philosophy to Kenny but Liverpool have always tried to play good football. Brendan has slightly different ideas that maybe took a little bit of time to get across.
"But you can see now that the team is starting to gel and maybe starting to play the way Brendan wants them to play.
"They had a difficult start but they have picked up and are doing really well and it's going to be a tough night for us.
"But hopefully West Brom can get the same result as they did last year at Anfield (a 1-0 win)."
Clarke will welcome back key midfielder Youssouf Mulumbu who has not played for the Baggies since New Year's Day because of a knee problem and then being on African Nations Cup duty.
He said: "You miss all your good players when they are out or unavailable. Youssouf represented his country, we should have dealt with it.
"The players who have gone in there have done well for us, have tried hard for us, but it's always good to have a player like Youssouf around the place.
"He is infectious, he is enthusiastic, he wants to make things happen and, even having him back in training the last few days, has been good for the group."