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.

A Medium humanoid druid that employs the supernatural ability wild shape to assume a Medium alternate form can, for example, consume a potion of enlarge person to gain that spell's benefits—like becoming Large and a +2 size bonus to Strength—while in that alternate form.

If that same (normally Medium but currently Large) humanoid (but having assumed an alternate form) druid then opts to end the wild shape effect while the enlarge person effect's duration continues, the druid resumes his normal original form except that the druid's Large as per the spell enlarge person until the enlarge person effect ends. (N.b. the spell enlarge person is dismissible.)

Were that same druid to then employ wild shape again to assume a Medium form again, he would assume that Medium form, the special ability wild shape setting his new size category overruling the ongoing enlarge person spell effect (q.v. One Effect Makes Another Irrelevant and—more tellingly—the omitted-from-the-SRD examples on PH 172).

So you know, this DM would likely rule that were the Medium humanoid druid to employ initially the supernatural ability wild shape to assume a Large or bigger alternate form, consuming the potion of enlarge person would have no effect. The enlarge person spell's description says, "Multiple magical effects that increase size do not stack" (PH 226), and the supernatural ability wild shape is, indeed, magical, therefore having the same constraints on its interaction with the spell enlarge person as any other magical effect.

However, this player wouldn't argue with a DM that ruled that because the supernatural ability wild shape sets a druid's alternate form to particular size that an enlarge person effect could work normally on that druid. That is, the supernatural ability wild shape doesn't change the druid's size but puts the druid's size at certain point and the enlarge person effect works from that point. This player may point out that this gives the druid an edge when employing size-changing magic—which is already pretty awesome—, but, since druids are involved, I don't think this ruling would even crack the top 10 list of Things I Worry About When Fighting Druids.