To place doubt in Karras’ mind.
The only mention of the holy water is the conversation between Karras and Chris in which he explains the holy water is really tap water and that is doesn’t support a case for exorcism.
However, we can hear the message being delivered to Karras in reverse English by “all the subordinate demons.”
The actions of the holy water sprinkling (tap water) was necessary for the demon to “invite” Karras into the exorcism and get the ball rolling. While it wasn’t holy water, the demon needed something to act upon to get his message across to Karras.
I believe, like many others, that Pazuzu needed that one last fight with Merrin because Merrin won the initial bout of exorcism in Northern Iraq that “nearly killed him [Merrin].”
Pazuzu seeks revenge and, therefore, all parts of the exorcism are neatly tied to together with the possession of Regan in D.C. where Karras resides. This ultimately leads to bringing Merrin into the clutches of Pazuzu once again and he finishes him off along with the altruistic Karras.
Then, of course, there’s the case of your own beliefs. Did good win over evil? Did evil win over good? 🙂