Conal Platt's penalty levelled for Rovers nine minutes from time, but Craddock won it from close range.
Instead it was Wolves who were to score the next goal, as Craddock thumped in a header from a corner.
Andrey Arshavin struck with a low shot from the edge of the area before Craddock headed in a late consolation.
Both featured Davies, with the second, when he appeared to be clipped by Jody Craddock, the more convincing, but Dowd was unmoved.
Defoe's 25-yard shot was easy for Marcus Hahnemann, Craddock's intervention helped Robbie Keane's shot over the bar and the Irishman later headed over.
But Luton stole all three points in the 90th minute when Craddock met Claude Gnakpa's header across goal to stab in from close range.
Russian ace Arshavin made it 4-0 on the hour before Craddock claimed a late consolation goal for Wolves, who are now in the relegation zone.
And Eduardo's chip went in off Jody Craddock's head to make it 2-0 before Robin van Persie's exquisite touch set up Fabregas to score a classy third.
Birmingham's best chance of the first-half fell to Bendtner who stole in ahead of Wolves duo Jody Craddock and Matt Murray only to be denied by the woodowork.
In the dying moments Doyle maintained that advantage when he easily saved McIndoe's weak injury-time effort from the spot after a clumsy barge from Bruno N'Gotty on Craddock.
However, his contribution was short-lived as he hobbled off in tears just seven minutes later, to be replaced by Mamady Sidibe, following a sliding tackle from Jody Craddock.
But it looked like being a frustrating night for the Hatters against the second-bottom club when both the recalled Craddock and veteran Kevin Gallen went close early on.
Arsenal had three points in the bag before halftime as Ronald Zubar and Jody Craddock put through their own net and the brilliant Fabregas finished off a slick passnig move.
It was Doyle's fourth goal of the season and made him joint top scorer with centre-back Jody Craddock - a statistic that goes some way to explain why Wolves had won only one game away from home.
Wolves moved four points clear of the bottom three, but were denied a first win at Villa Park in 30 years despite Jody Craddock's bundled 23rd-minute equalizer and an own-goal from England international James Milner seven minutes before halftime.
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