Holy water will not cute it. It will burn the undead pretty badly and distract them once they turn though! If they have holy spells on them, they will kill/affect the undead. They're pretty standard fantasy zombies. Holy curing magic is what absolves the infected of the plague.

As far as curing a demon/undead with holy magic, that's up to the players. I know in Warcraft canon, undead can be healed with holy magic, though it causes them great pain in the process. Have fun with it. :)