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Earlier Gary Kelly fired the visitors in front after 33 minutes with a quickly taken free-kick which caught Palace keeper Cedric Berthelin stranded at the opposite post, but Julian Gray levelled within two minutes with a superb 20-yard left-foot volley which whistled past a pack of players before settling into the right hand corner.
Then came Gallagher's clanger but anyway the Eagles plugged away and were the better side for long spells.
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Palace boss Trevor Francis said: "Today the players gave me more than I could of asked for with their performance - commitment and some great passing skills. It was a performance that we should not of gone out of the cup with.
"As for the disallowed goal, Francis added: "It was a type of decision that could rock you. Once I looked at it, it was two foot over the line.
"Despite the fact you can dominate the game when you are up against a Premiership side, they have a few players like Kewell that can put away a goal like that."