The hosts had numerous chances in the last 30 minutes to seal the win after McGugan's early strike had been cancelled out by Chris Brown.
But a draw looked an increasingly likely outcome until three minutes from time when Sean Murray was fouled by James Husband.
While Watford thought the offence happened inside the 18-yard box, Dickov was adamant it did not and said: "It's not a penalty. I thought that at the time and after seeing it again not just once but various times from different angles I just don't see how the referee can make that call with a couple of minutes left to go.
"It's outside the box. The linesman's flagged for a foul, which it was, the referee's got a prefect view of it but to give a decision like that late in the game is really disappointing."
Asked what he said to referee Darren Drysdale, the Rovers boss responded: "I told him it wasn't a penalty. Nine times out of 10 your first reaction is the right reaction and we didn't feel it was.
"I could tell by young James' reaction that it wasn't and as soon as I've seen the linesman flag for the foul at no point did I think he was going to give the penalty.
"We feel hard done by. We know they're a good team but we defended for our lives. The one thing I don't mind doing is to get beat but to get beat in that manner is a little bit sickening at the minute."