Pretty sure that's supposed to be a hard cap, so yes PCs shouldn't even have +1 items until level 3 or 4.
I THINK that they work off of the Craft price, not the purchase price for WBL.
As for wands, I don't know if there's an official method, but I do know that wands with less charges have a lower sell price, so yes, they should be cheaper (and thus more suited for low level parties) by a direct percentage if you have a wand with only 12 charges or something (Some loot in APs is like that I know).
I think the best way to do WBL is not stick to it as a hard and fast rule though, it's more of a guideline. If your level 2 party beats a level 4-5 challenge, then they should be rewarded as at least a level 3-4 party.
Personally I try to make sure everyone has at least Masterwork items by level 3, and sprinkle 1 or 2 +1 items in there from 4 onward, and so forth until everyone is equipped. I like giving out consumables whenever possible as well (because nobody buys them anyway), so if you feel that wealth needs "padding" half-charged wands, and potions and scrolls are always an option.
Then again, I play pretty loose with a lot of the wealth and prerequisite rules, so take whatever I say with a pinch of salt if you want to stick closer to the rules.
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More of a general response, rather than rules specific...
I suggest erring on the side of not quite enough treasure while you get the hang of what works for your game. It's always easy to increase the characters wealth. (Although there may be times you want them to be lean and have a tough time paying for stuff.) While there are many in game methods for 'removing' excessive wealth, many can appear very arbitrary to players.
I like to make wealth things the players have to 'work at'. For example, rather than just sack of coins, gems and/or jewelry use other items such as paintings, rugs, tapestries, expensive furniture, fabric, even exotic spices or perfumes. These items need to be transported back to civilization and buyers found. The right buyer and they might score big. However, showing up in a town with lots of valuables (openly) for sale, might entice the members of the local thieves guild to 'appraise' some of your belongings. ;-)
Man was I disappointed when I got into this thread. I thought the title read "Treasure PLANET Questions."
That would have been a great conversion.
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I think too much gold is ok at level 1&2 but I strongly favor a stern adherence to the wealth by level guidelines at level3 and up. I would rather the PCs have a strong chance of survival when they are 1st & 2nd level. Kind of like throwing a little fish back into the water. I especially would not want to kill a first time player during those levels. Once they hit 3rd, the should have a healthily number of HP and enough gold by level to easily properly equip themselves. I strong disagree to giving more the wealth by level from that point on because if you do, the PCs begin to overcome challenges too easily. A foolish DM then throws too hard challenges and can TPK the party. It is better to keep the PCs at expected gear and add a little extra challenge, even a little more if still needed, instead of dumping way too much at them and ending the campaign with a bad taste for everyone.
I don't think survivability at 1st/2nd level is a matter of gold. (I'm new to Pathfinder, so maybe it is.) But more about being able to overcome unlucky rolls. Perhaps use some sort of mulligan system? A certain number of re-rolls per level which may or may not carry over to the next level.
As for first time players, as the GM I just fudge die rolls like crazy. ;-) I also give them lots more 'Are you sure you want to do that?'. And of course advice about what their characters would know, but the players don't. Having one or more experienced *patient* players is also great.
Pathfinder has optional 'hero points' that are kind of similiar.