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After that, Burnley never really came close to forcing an equaliser, but they would already have been on level terms but for the heroics of Neil Cox.
Ten minutes before the decisive spot kick, the Watford skipper, on his own goal line, somehow managed to chest down the ball and hooked it over his own crossbar after keeper Alec Chamberlain had spilled Taylor's shot.
Earlier, Burnley had traded a mediocre first half, and would have been in front had Ian Moore managed to convert a couple of dangerous balls across the six yard box, or if McGregor had found the target with a free header from a corner.
Instead, they went into the break behind after an unmarked Helguson had made no mistake when Jermaine Pennant's fine cross gave him the opportunity to put Watford in front.
Marcus Gayle and Micah Hyde could both have doubled the lead early in the second half, but Burnley had the better of the chances before the penalty, with substitute Dimitri Papadopoulos going close on several occasions.
After Smith had made it 2-0 an error of judgement by Chamberlain handed the visitors the life line.
The Hornets keeper came, but did not get near a cross from the left, and Papadopoulos flicked it past him and although Cox again did well to get back and clear off the line, he could do nothing to stop Taylor stooping to head home the rebound.