Johnny Ertl gave Palace the lead and though James Collins replied for Aston Villa, a stunning 35-yard free kick, from Darren Ambrose gave Palace the lead again only for Stiliyan Petrov to head an 87th minute equaliser.
Related ArticlesBolton 1 Tottenham 1Fulham 4 Notts County 0A day after another financially stricken club, Portsmouth, boosted their coffers with a quarter-final place, Palace began as if there was nothing to worry about.
They may be in administration, 10 points worse off and fearing a fight against relegation, but after Villa dominated the opening exchanges, they took the lead.
In the 24th minute, Palace won a corner and, from the left, Darren Ambrose's kick rose high and so did Ertl, a man not used to scoring goals.
The 27-year-old had scored just six career goals previously, for clubs in his native Austria, but he climbed easily to beat James Collins and claim his first Palace goal.
The lead, though, was short-lived with Villa replying 11 minutes later. Clint Hill fouled James Milner and, from Stewart Downing's free-kick, Collins climbed un challenged to plant a firm header beyond Julian Speroni.
But, in first-half added time, Ambrose showed his ability from dead-ball situations again, but this time his ferociously-struck free-kick was parried by Brad Friedel, the Villa goalkeeper making his first cup start of the season.
Martin O'Neill, without Gabriel Agbonlahor but fielding an otherwise full-strength side, made a change at the interval with John Carew replacing Emile Heskey in attack.
And the Norwegian soon made an impact, meeting a Downing pass and forcing Speroni to save well.
Villa began to increase the pressure but they found central defender Claude Davis in outstanding form.
But the Carling Cup finalists squandered a chance to take the lead in the 68th minute when James Milner's flick was dealt with sloppily by Nathaniel Clyne, along Ashley Young a free run at goal but the winger sent the ball across an open goal area and into safety.
But Palace responded and, in the 70th minute Ambrose struck a remarkable 35-yard free kick to put the Championship side back in the lead. And two minutes later, Ambrose almost added a third, his effort striking the Villa cross-bar.
But Villa were denied in the 77th minute when Collins had one effort parried by Speroni and another, from the corner, blocked on the line by Nathaniel Clyne.
But after Carew forced another impressive save out of Speroni, Villa leveled, with three minutes remaining.
Downing's corner fell to the far-post from where Stiliyan Petrov stopped to head the late equaliser.