"I'm surprised and very disappointed he has missed out, because he is highly regarded in the job.
"Injury and a lack of opportunities have kept him out," MacRae said.
"I feel for him but at the same time I have no doubt he will force his way back."
In what was the most anticipated All Blacks announcement in history, plenty of quality and experience has missed out.
Charles Piutau, Cory Jane and Neopo Laulala are the other unlucky exclusions. Crusader Dagg was a star at the 2011 tournament, starting in four of the seven matches, and was the ABs' top tryscorer with five.
Highlander Ben Smith has had a stranglehold on the No15 jersey since 2013, forcing Dagg to battle for a cover position. Being a specialist fullback, Dagg was unable to compete with the likes of Smith and Colin Slade for versatility.
A lack of form in the past two seasons has seen him fall out of favour with All Black selectors, and the hot form of Hurricane Nehe Milner-Skudder and Naholo was impossible to ignore.
Dagg starred in the recent Air New Zealand promotion video, rapping alongside Stan Walker, which fuelled speculation he would make the World Cup cut.
His dream was shattered, however, and Dagg took to Twitter to voice his disappointment.
"Gutted to not be in the RWC2015 team but congrats and all the best @AllBlacks men. It's been a hell of a journey, cheers."