Manager Rafael Benitez has a real problem on his hands to get his team firing on all cylinders, something that Palace did in a manner that would have delighted their manager, Iain Dowie.
The visitors, fielding a strong side, were ordinary, lacking invention and inspiration. Steven Gerrard could not do it all by himself and once again the visitors' strike force failed against a spirited Championship side.
Benitez had made no secret of his frustration with Liverpool's stuttering strike force, which has managed only five goals in eight Premiership matches.
Harry Kewell went into this tie not having scored in 10 months, likewise the young substitute Florent Sinama-Pongolle. Spanish striker Fernando Morientes was looking for his first goal since April, while Peter Crouch was hoping to open his account for the European champions at the 11th attempt following his summer transfer from Southampton.
With Gerrard driving his team from midfield, the visitors created three good chances in the first 20 minutes and Palace were grateful Julian Speroni was at his best. In the 12th minute he parried a right-foot shot by Kewell from the edge of the penalty area and then the goalkeeper saved an angled shot from Morientes with his legs.
Speroni then dived to his right to push a curling effort by Gerrard for a corner but Palace almost punished some poor defending at the other end with Liverpool goalkeeper Scott Carson saving strong headers by Fitz Hall and Freedman.
With 30 minutes gone it was remarkable there had not been a goal in such an open match. Kewell will probably think he should have done better with a volley from Darren Potter's left-wing cross and though the injury-plagued Australian met the ball with his favoured left foot, it went wide of Speroni's goal.
The deadlock was finally broken in the 37 minute when Zak Whitbread was caught ball-watching as Michael Hughes crossed from the left, allowing Freedman to beat Carson with a close-range header.
Palace's lead lasted just three minutes before Gerrard effectively created and finished the equaliser. His pass into the Palace penalty area was blocked by Mark Hudson who slipped. Gerrard, who had continued his run, regained possession before scoring with a well struck shot from 20 yards.
Palace's first attack after the interval saw Clinton Morrison strike the right elbow of Whitbread but despite the penalty appeals, it was clearly not deliberate hand ball by the Liverpool defender.
The home crowd, following the dubious lead of England fans and those at Fulham last Saturday, seemed to delight in booing Crouch, the striker's apparent crime being that he is 6ft 7ins.
Gerrard, the tie's outstanding performer, stripped the Palace defence putting Morientes clear but the striker seemed to lack the confidence to shoot, laying the ball off to Potter whose effort went over the crossbar.
It was Morientes' last contribution to an exciting tie before the player who won three Champions League medals with Real Madrid was replaced by Sinama-Pongolle.
Palace, who had been giving as good as they got against Liverpool, regained the lead in the 66th minute and Benitez was clearly unhappy that his side allowed the home team to have so much space and time in the visitors' penalty area.
Liverpool had struggled to clear the ball which fell to Hughes and his trusty left foot picked out Reich, the midfielder scoring with a volley from 10 yards.