They were recently taken over so I suspect the Italians have a bit of money to sign one or two of the loans.
I remember the Leeds side that went down from the prem was made up pretty much solely on loan players but under very different circumstances. Watford seem to be using their Italian links to develop prospects whereas Leeds were just plain desperate.
I have no problem with it as in a way it's a risky strategy as come the end of the season they could have a very, very small squad. In saying that it could be a good way of bridging the gap between champ and prem without having to clear out surplus non-prem quality players who would end up in the reserves running down contracts.