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I was surprised by this one as well! Maybe they thought they could raise the players value by letting him play in the Prem. If it doesn't work send him back to Watindese.

Then same applies in theory we would be hit with a transfer embargo but i think this only comes into affect in 2 years time, when clubs have been adjudge enough time to get their house's in order.

There have been statements about transfer embargoes but again Watford won't be touched by that because they shouldn't over spend on players!

http://en.wikipedia.org/wiki/Giampaolo_Pozzo Giampaolo Pozzo bought Udinese Calcio in July 1986. After a betting scandal, the team was demoted to Serie B; and a nine point deduction in the Serie A championship of 1986/1987 after winning promotion. This ultimately led to relegation once more to...

http://en.wikipedia.org/wiki/Giampaolo_Pozzo Giampaolo Pozzo bought Udinese Calcio in July 1986. After a betting scandal, the team was demoted to Serie B; and a nine point deduction in the Serie A championship of 1986/1987 after winning promotion. This ultimately led to relegation once more to...

Exactly, another 2 clubs!

http://www.bbc.co.uk/sport/0/football/23669181 Watford have signed Algeria international defender Essaid Belkalem on a season-long loan from sister club Granada. The Hornets have the option of signing the 24-year-old on a permanent deal. Belkalem, Watford's first loan signing of the season, was...