Indeed, that seemed a bit odd at the time. But to be honest, if he hadn't done it Paraguay probably would have scored (well, scored again, strictly speaking) an equalizer, what with the English defense being in tatters for much of the second half and all. They definitely did not look like a team that can get anywhere near the title unless a lot of things get fixed very fast.
First of all, they need to come up with a better attack plan that "Lob ball at the really tall bloke up front and pray", second, the midfield needs to work out some kind of cooperation scheme with the offense and themselves where they can actually pass the ball forwards or sideways instead of exclusively passing it back or trying a solo run every time they recieve it. And third, the defense needs to actually attack the guy with the ball instead of just standing around looking dumb until he gets within striking distance.
[Edit] PS, not that it affected the result, but was that ref really as poor as I thought or was I just dreaming? Oh, and no offense to the 'tall bloke' (Crouch, right?) they kept lobbing balls at, he was one of the few who did a really good job on the English team. It's just not gonna work if that's all they do.