Eagles boss Holloway raised a few eyebrows when he raided former club Blackpool on deadline day to land 39-year-old striker Phillips on loan.
But the former England international repaid that faith with a trademark second-half finish 15 minutes after coming on as a substitute.
"What a class act, let's be honest," said Holloway. "I don't know anyone as professional as Kevin and that was a hard chance to put away. He's 39 going on 18, and I'm delighted for him."
Phillips' goal snatched a point which looked unlikely following a first half in which Watford blew their promotion rivals away.
One of Watford's numerous Udinese loanees, Almen Abdi, fired them ahead in the sixth minute with a well-placed finish from the edge of the area after a mistake by Jazz Richards. Teenager Nathaniel Chalobah doubled the lead when he headed in after Marco Cassetti's volley hit the turf and bounced up kindly for him at the far post.
Palace pulled one back in the 66th minute when Peter Ramage prodded home. And four minutes later Richards put a low, inviting ball on a plate for Phillips to tuck away as he has been doing for the past 20-odd years.
But Holloway was clearly not impressed with Watford's recruitment policy.
"I need some foreign scouts, or to befriend a big club like they have, and to nick all their players," he added. "They've got nine from one club! It's a loophole and that's wrong. Unlimited foreign loans? It can't be right."