The Nittany Lions outscored the Scarlet Knights 43-32 in the second half, but it wasn't enough to complete the comeback.
Lee spent three seasons with the Nittany Lions before transferring to Mississippi State after the 2022 season.
Kotelnicki was rumored to be involved with the West Virginia head coaching job.
The offense tired to mount a comeback, but penalties and turnovers plagued its efforts.
Wallace was questionable in last week's game against Maryland and Washington has missed the last two weeks due to an injury.
Both Carter and Warren are considered first-round prospects in the upcoming NFL Draft.