Wallace scored the 90th-minute winner at St Andrew’s and whipped off his shirt as he celebrated in front of the travelling North End fans.
Referee Dowd pulled out the yellow card to punish him for his topless antics and then showed him red as it was the winger’s second booking of the contest.
The teatime contest was a busy one for Mr Dowd, with him having earlier sent off PNE’s on-loan midfielder Lee Williamson and his Blues counterpart for fighting.
So Preston had to see out stoppage time with only nine men, holding on to their 2-1 lead which meant they went into the final weekend in with a shout of the play-offs.
Just a fortnight before, the top six had looked beyond them but Alan Irvine’s men found their winning touch just in time.
North End had to come from behind in this visit to the West Midlands against a Blues side who were looking to confirm promotion.
The away victory meant the home side had to delay their party by a week.
Birmingham took the lead in the 58th minute through Keith Fahey.
Preston came back with a stunning equaliser from the right boot of Paul McKenna, that goal coming when it was a 10-versus-10 contest.
When Wallace found the net and went bare chested, it became 10 versus 9, not that it stopped North End.
In the first half they had given as good as they got in front of an expectant home crowd who were there for a promotion knees-up.
Three times they had shouts for a penalty turned down, with Neil Mellor seeing a shot come back off the post.
Early in the second half, Sean St Ledger put a header wide from six yards when he should have scored.
It looked like it could be a costly miss when the hosts went ahead soon after.
James McFadden cut in from the right wing and his floated cross was met in the air by Fahey who headed past Andrew Lonergan.
Within three minutes came a big flashpoint when Williamson and Bowyer got their marching orders.
Bowyer seemed to wrestle the PNE man to the floor and held on to his shirt as he tried to get up.
The duo went head to head, the rutting-stags act too much for Mr Dowd who pulled out the red card.
North End equalised in the 69th minute with a special from McKenna.
St Ledger’s long ball up the pitch was headed by Wallace into the path of McKenna who took a touch before letting fly with a 30-yarder which found the top corner.
As the clock ticked into the 90th minute, North End won a free-kick when Simon Whaley was fouled by Jaidi.
It looked like McKenna was shaping to try his luck but instead Wallace took it and curled it into the net off the inside of the post.
Off went the Scotsman to celebrate, off came his shirt and off he went as Mr Dowd showed him a second yellow and then red.
Wallace said: “It was a good strike and as soon as I hit it I knew it was going in.
“But it got me sent off which was bad news. It was just a spur-of-the-moment thing, I took my shirt off to celebrate.
“If I had thrown it away then fair enough, I should be booked. But I had the shirt in my hand, it’s a crazy rule.
“I just got carried away in the heat of the moment.”