Goals from Almen Abdi and Nathaniel Chalobah put the home side in control before Peter Ramage prodded home on 66 and Kevin Phillips completed the Palace comeback four minutes later with a cool finish.
But Holloway could not help being critical of Watford's recruitment policy, which has seen them loan several players from Italian club Udinese who have the same Italian owners.
"I need some foreign scouts, or to befriend a big club like they have, and to nick all their players," he said.
"They've got nine from one club! It's a loophole and that's wrong. Unlimited foreign loans? It can't be right.
"I thought we were too worried about stopping them. I want to attack, so I thoroughly enjoyed the second half. We got what we deserved and maybe by the end we could have nicked something else.
"What we need from now on are some second half performances in the first half."