However, the embargo is only in place under Regulation 19, which means that when the issue causing it has been resolved the embargo is lifted. The reason there's an issue is a loan where the people lending them the money were told they'd be repaid when Watford received installments of a transfer fee or they could take it from their FL/PL payments. The bold bit they did without the permission of the FL. Repay the loan early and there's no issue.
Also, if Watford cease to be a Football League club (by getting promoted), how is the football league able to block their transfers? It'll only be a matter for the PL and the FA.