In many respects it was a fortunate win which was carved out by two goals in the last five minutes from Gavin Mahon (own goal) and Gabby Agbonlahor.
It was a cruel defeat for Watford as they had appeared to be heading for a well earned draw.
But they again tasted the bitter truth that good fortune hardly favours struggling teams as they discovered in the final desperate five minutes.
The win hardly solves O'Neill's pressing problems which were highlighted in a five minute spell when Milan Baros conspired to waste three gilt-edged chances to have sealed the game.
O'Neill must have been thinking that there would be no end to the nightmare before poor Watford finally surrendered in the last five minutes of the game.
Even then there was a great slice of luck about Villa's breakthrough. Steven Davis produced a good corner from the left which eventually found Gavin McCann lurking on the right.
He attempted a hopeful shot which cannoned off Malky Mackay and Mahon before the ball limped into the net past a helpless Ben Foster.
Agbonlahor finally stepped in to settle the game in the last minute, when he collected a through ball from McCann to slip his shot past Foster into an empty net.
But one win does not solve O'Neill's pressing problems which are focused on his lack of striking power.
Now he is hoping that Ashley Young will agree to join Villa for a club record fee. Young didn't watch the game and if he had he might easily have second thoughts about his move from Watford which could be sealed after a weekend medical.
O'Neill obviously gambled with his out of form strikers, Baros and Juan Pablo Angel. They have been a huge disappointment this season and there was no improvement on this occasion and both were substituted in the second half.
Their failure to make any impact almost had a real bearing on the outcome of this game, with Villa desperately needing to win to kick-start their season.
O'Neill has been patient with the squad he inherited but they simply lack a cutting edge to take teams apart.
They had a slow build-up and afterwards wasted numerous chances against a Watford side which played with lots of heart and endeavour to salvage their surprise away point.
Mackay and Danny Shittu were stalwarts in Watford's defence and they repeatedly thwarted Villa's mis-firing attack.
Their dominating work often inspired their front men and just before the break Thomas Sorensen had to be in top form to keep out efforts from Hameur Bouazza and Will Hoskins.
Hoskins, recently recruited from Rotherham, nearly set the game alight early in the second half with a deft flick which sent the ball just wide of the upright.
Goalkeeper Foster also took the honours with several smart saves, including one from Gareth Barry in the first half when he turned a close-range shot on to the outside of the post.
Villa appeared to be stumbling to a goalless draw before their late bid salvaged the points when Mahon put through his own goal and Agbonlahor slotted home the second goal.