The dowel was just temporarily installed to plug the hole so filings couldn't enter.
In the "Final" picture the two crescent shaped ridges used to be a circle. The seal is on the inside and rests against these so that it cannot come out. The back of the seal is held by the Retaining Tab so it can't go in.
After you get the keyhole made, you can insert a J shaped object into the hole in the old seal to keep it from falling into the engine. Then, push the old seal in and rotate it to come out the keyhole edge first.
Insert the new seal edgewise thru the keyhole; rotate it so the rubber is to the outside and the metal is to the inside; maneuver the seal between the retaining tab and the ridges; use the J shaped tool to pull the seal into position shown in "Final"
A cut-away drawing that shows the shapes involved would help, but I haven't found one.