Lions captain Danny Shittu headed the only goal of the the sixth-round replay and a sparse Ewood Park crowd of 8,635 - the lowest quarter-final attendance in recent memory and 100 fewer than the number at Chesterfield's last-eight clash against Wrexham in 1997 - could not inspire a Rovers fightback.
Leon Best's 63rd-minute attempt, brilliantly cleared off the line by Shane Lowry, marked a rare moment of inspiration and Appleton conceded morale was through the floor at full-time.
"You can probably imagine the atmosphere in the dressing room after the game," he said. "It's the type of situation that, as a manager, you don't forget. To lose how we did lose, to a set-play, probably makes it even harder to take.
"We huffed and puffed, the lads gave us absolutely everything to be fair. I had to make a lot of changes again due to injuries, which was hard, but I can't ask any more of them.
"From an effort point of view, there's nothing more that any of the players could have given me. From a quality point of view, yes we could have been better."
Blackburn's form sheet since their fifth-round upset of Arsenal reads played seven, lost five, drawn two and they could head into Sunday's east Lancashire derby against Burnley three points above the npower Championship drop zone.
A second consecutive relegation for the 1995 Premier League champions is an unthinkable prospect and Appleton believes a huge change in attitude is required among his squad.
"We've got 10 massive games now," he added. "There's an opportunity to change the whole mentality of the football club.
"For probably two or three seasons now it's been acceptable to lose and it's not too much of a bad thing, and that's the hardest thing for me to take - for some of the players it doesn't hurt as much as it should do."