The Saddlers struck the bar twice in the first half only to fall behind to a harshly awarded penalty converted by skipper Tony Popovic on 50 minutes. Further goals from Danny Granville and Michael Hughes wrapped up the tie for the Championship side.
The first 45 minutes were annoying to say the least as both sides had chances to give the tie a lift it desperately needed.
Paul Merson's outfit could count themselves unlucky as Mark Wright volleyed against the crossbar early on and then ten minutes before the break Jorge Leitao also struck the bar with a spectacular scissor kick.
Palace striker Wayne Andrews was having a hard time and should have scored a couple of goals before the break. First, Andy Oakes stuck out a hopeful leg to deny Andrews, but the young Palace hitman then missed an absolute sitter by shooting wide of an open goal after Oakes spilled Hughes' long-range shot.
Six minutes after the break, the Eagles got a kind piece of luck. Hughes floated over a deep cross to Danny Butterfield, positioned just outside the penalty area.
Butterfield struck the ball against the hand of Daniel Fox and referee Mr Singh surprisingly pointed to the spot. The entire Walsall side pleaded their case but it made no difference and Popovic neatly tucked the ball low into the right corner.
Andrews missed a couple of further chances much to the frustration of the home crowd, but Granville produced a perfect finish seven minutes from the end to increase Palace's lead. The Eagles full-back won the ball on the halfway line, then edged forward before curling a beauty from 25 yards out past Oakes.
And two minutes from the end Hughes wrapped up the tie after substitute Lewis Grabban struck a low shot which was half stopped by Oakes. Hughes was not far away to roll the ball into the empty net to complete Palace's win.