[RPG] Do a druid’s uses of the Wild Shape feature recharge if they take a short rest while still in Wild Shape

Like most other answers, I would say yes, two shapeshifts in a combat is legit; no, you did not make a mistake by allowing your player to wolf out and; no, you shouldn't try to claw back the ability.

One thing I would add to the previous answers is that this issue will almost certainly balance itself out fairly soon. Yes, a CR 1 creature in a level 2 party is huge. But level 2 ends quickly.

• At level 3, most classes get their archetype paths with cool powers and primary casters get level 2 spells. The wolf will be the same wolf it was before.

• At level 4, a CR 1 creature is considered a medium encounter for a single party member. Everyone will be pumping their primary stat or taking a feat. Wolves don't get much out of Wisdom, nor is there much overlap between the feats that help them and those that work for druids.

• At level 5, all classes see a major power spike. Cool abilities, level 3 spells, proficiency bonus goes up to +3. The party might also be finding minor, but interesting, magical items. While your Druid is kicking it lupine style, they won't get to enjoy any of that.

• By level 6, the Druid can finally upgrade to a CR 2 creature! Of course, at 450 XP, a CR 2 is less than a medium difficulty solo encounter for a character that level.

The dire wolf will remain a CR 1 creature while the world around it scales up. On top of that, if your player wants to jump straight into wolf form every encounter, then every encounter is going to play exactly the same for them, because a wolf only gets the one basic attack.

I'd say, let your player have their fun. Everyone should get a chance to feel like they've beaten the system once in a while. It doesn't seem to be worth the trouble of taking that away from them if the whole situation will simply resolve itself in time.

I'd honestly be more worried that a character with a d8 hit die has 28 hitpoints at level 2.

From the PHB page 66:

Starting at 2nd level, you can use your action to magically assume the shape of a beast that you have seen before.

And page 69:

At 10th level, you can expend two uses of Wild Shape at the same time to transform into an air elemental, an earth elemental, a fire elemental, or a water elemental.

It seems fairly clear that these are two distinct abilities, even if they share many of the same rules. The first allows you to take the form of "a beast that you have seen before", while the second lets you take the form of four specific creatures. There is no mention of needing to see those creatures before you turn into them.

It should also be noted that this only allows you to turn into one of those four, specific elementals, not elementals in general. So you can't use Wild Shape to turn into, for example, an Azer or a Galeb Duhr.

Finally, if your DM decides to rule that you need to see each of them to turn into them regardless, you can always cast Conjure Elemental four times to see each of them.