The 2004/05 season started well for Wallace, playing from out-half he hit the winning drop goal in the 17–16 defeat of Edinburgh at Murrayfield but after this the Ulster team and himself both suffered a massive dip in form. After the home defeat to Leinster in September 2004 he was relegated to the bench to accommodate David Humphreys at out-half. He made a number of appearances off the bench in this period but having come on for David Humphreys in the away Heineken Cup defeat to Gloucester he damaged knee ligaments that would see the him ruled out until the new year.