Following Bouazza's strike, Premiership strugglers Watford were rarely seen again as an attacking force but, despite wave upon wave of home attacks, Aidy Boothroyd's men held firm.
England goalkeeper Ben Foster came to their rescue on a number of occasions, while defender Dan Shittu, who learnt his trade under Holloway at QPR, was outstanding.
The game's decisive moment came when Argyle, who had beaten Championship promotion favourites Derby in the previous round, failed to mark up properly form a corner.
Steve Kabba and Tommy Smith linked up for Kabba to set up Bouazza, running in unmarked from deep. He let fly with a left-foot shot that Argyle goalkeeper Luke McCormick never saw.
Until late in the second half, when Watford substitute Darius Henderson made McCormick save, that was as far up the field as Watford got.
Hornets captain Gavin Mahon cleared the ball under pressure from Sylvan Ebanks-Blake after David Norris had initiated an Argyle attack down the right, before Kevin Gallen fired in a low free-kick which Foster just touched wide.
Shittu made two last-gasp challenges to deny on-loan Chelsea starlet Scott Sinclair, before captain Lilian Nalis fired Gallen's flick-on just over.
Foster went full length to keep out Norris' left-foot grass-cutter before kicking out Ebanks-Blake's shot.
When Foster was beaten, by Paul Connolly's driven cross from the right by-line Mahon deflected the ball away for a corner, off the toes of Dan Gosling.
Argyle's half-time substitute Barry Hayles began the second period by brushing past Jay DeMerit, who was rescued by alert Foster, who was then booked for time-wasting.
Ebanks-Blake then played in Norris for a drive that was high and wide before Boothroyd attempted to shore up his side by sending on a defender James Chambers, for Kabba.
Next, Gallen wriggled free to send in a shot that was deflected past the under-siege Foster for a corner.
Argyle's Hungarian centre-back Krisztian Timar, who had a good game at the back, nearly stole in at the far post to head an equaliser that looked sure to come.
With Argyle concentrating on all-out attack, Watford found respite in working the ball forward to substitute Henderson in search of a second goal that would have killed the tie.
However, McCormick, who had very little involvement in the game, was alert enough to get down to block Henderson's best effort.
Argyle were soon back on the attack and Foster was forced into action again as Nalis got his head to a free-kick from substitute Tony Capaldi.
It proved to be the Pilgrims' last real chance, though they deserved a better fate.