I disagree and I'll repeat what I said above: this is the antithesis of the scientific method. It's faith based and it opens the door to accepting hypotheses that have zero evidence to back them up. Follow this reasoning and you can just make things up.
So, what? You just stop once you eliminate the known possibilities?
That last possibility REQUIRES experiment, investigation and thought to verify. If you discover a new possibility then you apply the process again.
The approach is not a one-shot deal, you MUST keep applying it. The current laws of physics are models that we use to explain what we observe and (if the model is good) predict what we might observe.
This by no means implies that that the models describe what's really going on. It is possible to have a model that describes a system that works but is not complete. The deeper we dig, the more we learn.
The fictional quote was meant to describe a deductive approach to investigation, not a rigid method. How often did Holmes dig up new facts and change his mind after eliminating possibilities?
It still involves a rigorous logical reasoning, not accepting something because you're running out of ideas.
This is still based on falsifying the hypothesis; prediction is one of the useful tools by which a hypothesis can be experimentally tested. If a prediction ends up being incorrect, you're left with the null-hypothesis. It's entirely possible that the null-hypothesis may not be particularly useful, but it - as Holms said - "must be the truth".
At it's core, the scientific method is simply proposing ideas, and testing them. As zombie-Feynman said. "everything else is bookkeeping"[1].
"Once you have falsified every other possible hypothesis, whatever hypothesis remains is the one we'll promote to a theory."
Holmes' is not saying you get to just make things up - he's trying to explain that instead of trying to prove something directly, inverting your perspective and falsifying as many incorrect interpretations ("the impossible") should always work - even if yo don't understand why.
That quote is an incredibly efficient summarization of the scientific method's core philosophy that (because you can't prove a positive), you falsify wrong hypothesis instead.