Contextually, Bob's correct

If the campaign is a series of tombs of horrors, then that ring of cure light wounds is an item beyond price. If the party can't leave the dungeon to resupply and can't get down to one encounter per day (i.e. the so-called 15-minute workday) via spells¹, that ring of cure light wounds is a literal lifesaver.

In other words, if the campaign is already on hard mode, the ring switches it not to easy mode, certainly, but to average mode. That's a legitimate concern for the DM. The DM's already decided the campaign's supposed to be difficult and the ring makes the campaign substantially less difficult. As the ring violates a central campaign tenet, the ring just shouldn't be available… or only available as a result of a heinous Gygaxian Faustian bargain.

For the game as it was likely envisioned, Erin's correct

The Dungeon Master's Guide would likely pick Erin's suggestion. If worry-free, constant healing is desired, everybody should pony up for rings of regeneration (DMG 232) (90,000 gp; 0 lbs.). Sure, each ring of regeneration costs as much as 120 wands of cure light wounds [conj] (PH 215–16) (1st-level spell at caster level 1) (15 gp/charge), but, y'know, the Dungeon Master's Guide says to "[u]se good sense when assigning prices, using the items in this book as examples" (282), and the ring of regeneration presents the example of the price of worry-free, constant healing, so that is the price of worry-free healing. In fact, an original magic item like a use-activated ring of cure light wounds—like a continuous item of true strike [div] (PH 296)—is such an anathema, I'm willing to bet were the year 2000 Dungeon Master's Guide a DM that it would laugh at the player who suggested a ring of cure light wounds and maybe have the next wandering monster attack him first just for asking.

For many games as they are now, Alice or Dave is correct

Many current players feel that constantly reacquiring wands of cure light wounds to have their characters freshen up between encounters is, at worst, a mere inconvenience, like tracking how many arrows remain in a quiver. In the same way that being short on arrows creates tension at low levels, managing healing resources at low levels creates tension. Many players, though, feel that by the time a character's reached a reasonably high level—say, 9 or so—that the character should have more important things to worry about than how many arrows he has left, and he shouldn't worry that he's burning party resources because he fell down a 200-ft.-deep pit. A Ftr9's Wealth by Level (Dungeon Master's Guide (203) 135) says that a wand of cure light wounds—that is, an entire wand, fully charged—is only about 2% of the gear he's toting. Seriously, after splitting four ways the take from a lone level-appropriate encounter, a Ftr9 can buy a whole new fresh wand of cure light wounds and still have gp left over.

If a DM has players like Alice and Dave, a ring of cure light wounds makes the game more fun because it cuts down on tracking charges from wands of cure light wounds, and the DM should probably allow it—either at low levels at Alice's price or higher levels at Dave's price—unless the DM's vision of the game differs substantially from that of the players' vision.

A brief history of the ring of regeneration

As the sole item that grants continuous healing in core Dungeons and Dragons 3.5, the ring of regeneration is terrible and using it as an example of what continuous healing should cost is terrible. I'll explain.

Building as they were in 2000 from Advanced Dungeons and Dragons, 2nd Edition, the ring of regeneration included in the Dungeon Master's Guide for Dungeons and Dragons, Third Edition probably looked fine to the original core rules' authors. The changes made to the ring of regeneration were a much needed nerf to improvement over Advanced Dungeons and Dragons, 2nd Edition's ring of regeneration, which, for the record,

restores 1 point of damage each turn [10 minutes] and eventually replaces lost limbs and organs. It will bring its wearer back from death…. Only total destruction of all living tissue by fire, acid, or similar means will prevent regeneration. Of course, the ring must be worn, and its removal stops the regeneration process.² (Encyclopedia Magica, Vol. 3 993)

Such an item was highly coveted in both Advanced Dungeons and Dragons (where it functioned similarly) and Advanced Dungeons and Dragons, 2nd Edition, and for good reason. One's character could lose limbs and organs. ("Why, hello there, sword of sharpness!") Dying was really painful instead of the speed bump that it typically is in Dungeons & Dragons, Third Edition. And healing was, itself, extremely valuable, the province of classes that often weren't much fun to play and rarely advanced beyond level 6 through actual play.³

So when the time came to include the highly-sought-after ring of regeneration in Dungeons and Dragons, Third Edition, the price was set very high because legacy yet the ring's actual functionality plummeted. Creatures no longer lost limbs except under extremely rare circumstances. Creatures now healed their levels or HD in hp per 8 hours rest instead of just 1 point per day of rest. And gone was the jazz about the ring bringing the wearer back from the dead. The only improvement Dungeons and Dragons, Third Edition made to the ring was proportionate healing (that is, Third Edition's heals a creature's level in hp)… and then Third Edition multiplied the ring's healing increment by 6.

Anyway, the current ring of regeneration seriously sucks as useful measure by which to gauge unlimited healing.

¹ By, after the first encounter, hiding in, for example, the space created by the 2nd-level Sor/Wiz spell rope trick [trans] (Player's Handbook 273), the 5th-level initiate of Gruumsh (CR 24) spell pocket cave [conj] (Champions of Ruin 33), or the 7th-level Sor/Wiz spell Mordenkainen's magnificent mansion [conj] (PH 256).
² Okay, a similar means to fire is heat. Sure. I get that. That's a thing. But what's a similar means to acid except, like, better acid? I hope whoever wrote that spent his $0.10 from those words wisely.
³ I find the experience level chart for the cleric or priest, respectively, in Advanced Dungeons and Dragons or Advanced Dungeons and Dragons, 2nd Edition—when compared to classes' experience level charts—hilarious.

Rule interpretation in general

There are two points to remember when looking at an ambiguous rule:

1. Your group, with the DM as final arbiter, decides the ruling for the rule. So, you need to establish what this is for each group that you play with.

2. Specific beats general. Start with the most general rule you can find and see how the specific rules change this.

Armor resizing in particular

For your issue, start with PHB p. 145 (ignoring the optional part because it makes no difference to the case at hand)

Variant: Equipment Sizes

In most campaigns, you can use or wear any equipment that you find on your adventures, within the bounds of common sense. For example, a burly half-orc won't fit in a halfling’s leather armor, and a gnome would be swallowed up in a cloud giant’s elegant robe.

There's your general rule: no armor that fits a PC race (size S or M) would fit a bear (size L).

Wild Shape (p. 67 PHB) says:

Worn equipment functions as normal, but the DM decides whether it is practical for the new form to wear a piece of equipment, based on the creature’s shape and size. Your equipment doesn’t change size or shape to match the new form.

No help there; the armor will be too small and the wrong shape. In addition, there is a ruling that has to be made right here: is it practical for a bear to use armor even if it is the right size and shape? My ruling would be yes but your results may differ.

Now from DMG, p. 140:

In most cases, a magic item that's meant to be worn can fit a creature regardless of its size or build. Many magic garments are made to be easily adjustable, or they magically adjust themselves to the wearer.

The ruling needed here is does the hide armor a) need easy adjustment or b) magically adjust itself. If b) then all is easy, if a) then the druid may need to allow it to drop to the floor and then get some assistance to put it on which would take 5 minutes (PHB, p. 146) which makes it pretty useless in combat.

Those are the issues; your group needs to make the ruling.