We present high-resolution hydrodynamical simulations of isolated dwarf galaxies including self-gravity, non-equilibrium cooling and chemistry, interstellar radiation fields (IRSF) and shielding, star formation, and stellar feedback. This includes spatially and temporally varying photoelectric (PE) heating, photoionization, resolved supernova (SN) blast waves and metal enrichment. A new flexible method to sample the stellar initial mass function allows us to follow the contribution to the ISRF, the metal output and the SN delay times of individual massive stars. We find that SNe play the dominant role in regulating the global star formation rate, shaping the multi-phase interstellar medium (ISM) and driving galactic outflows. Outflow rates (with massloading factors of a few) and hot gas fractions of the ISM increase with the number of SNe exploding in low-density environments where radiative energy losses are low. While PE heating alone can suppress star formation slightly more (a factor of a few) than SNe alone can do, it is unable to drive outflows and reproduce the multi-phase ISM that emerges naturally when SNe are included. These results are in conflict with recent results of Forbes et al. who concluded that PE heating is the dominant process suppressing star formation in dwarfs, about an order of magnitude more efficient than SNe. Potential origins for this discrepancy are discussed. In the absence of SNe and photoionization (mechanisms to disperse dense clouds), the impact of PE heating is highly overestimated owing to the (unrealistic) proximity of dense gas to the radiation sources. This leads to a substantial boost of the infrared continuum emission from the UV-irradiated dust and a far infrared line-to-continuum ratio too low compared to observations. Though sub-dominant in regulating star formation, the ISRF controls the abundance of molecular hydrogen via photodissociation.