Murray left the Seagulls to move to their fierce rivals 18 months ago and scored twice to take his tally for the season to 17 goals from just 16 league games.
Owen Garvan added another from the spot, Palace’s second penalty of the day, while Brighton played 83 minutes with 10 men after Lewis Dunk’s early red card for bringing Yannick Bolasie down when he was through on goal.
Bolasie was impressive throughout while Murray’s goals grabbed the headlines, along with his decision to let Garvan take the second spot-kick instead of going for the hat-trick himself.
“He is a fantastic footballer,” said Holloway. “His football brain is as good as anybody I have worked with. He knows the timing of how to do that run down the middle and his eye for getting on the end of a cross is completely awesome.
“I have had some great players in my time and to be honest Glenn is right up there with all of them. That’s nine goals in six games he has scored for me and that’s quite awesome. He is very clever.
“He was ill this morning and he wasn’t going to play but we managed to get him out there.
“I am delighted with the professionalism of my lads even down to Murray giving up the penalty for his hat-trick as he has missed a couple recently.
“What I am delighted with is the players, the squad, the crowd the whole thing just feels really good as that’s a good team we managed to beat.”
Watford boss Javi Gracia does not think Abdoulaye Doucoure's form will be affected by his omission from France's latest squad.