I myself allow it in my games without any real problems, but if you strictly adhere to RAW, i believe the answer is no.
Maybe if you'd seen one, wild shape states that the form you take must be a creature you are familiar with, so if one was familiar with a species of giant wolves than yes you probably could, but if not, only the size of a normal wolf would be legal
I am fairly certain that transmutation (the magic school that has beast shape, which is the main spell wildshape is based off of; also saw extensive and deliberate revision by paizo due to 3.5 weirdness) does not allow templates for the form you assume.
But as 14 sided die said, you are more limited by the bestiary and your knowledge(nature) checks. If you can find a species of pygmy wolves, then sure, you can turn into a small wolf. You just can't turn into specific, exceptional examples of the species.
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I handled this issue in my games with the following...
1st if a player could make a knowledge Nature DC10+CR I considered them familiar with the animal they wanted to change into. This was in place to cover an arctic themed druid being familiar with a lion for example.
2nd the Wild shape ability is pretty clear as how you can use it, in part if functions as the beast shape spell. With that being said... There are "animal" creature listings of different sizes.. For example.. Wolf>medium, Direwolf>large, and I would allow templates like "young" to be applied to a wolf which would allow a small version. To me if the player was trying to play by and expand the Idea of the rule I would encourage that type of use.
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on a side note... Templates are specificly covered under the Polymorph section in the Magic chapter in the CRB.....
"Unless otherwise noted, polymorph spells cannot be used to change into specific individuals. Although many of the fine details can be controlled, your appearance is always that of a generic member of that creature's type. Polymorph spells cannot be used to assume the form of a creature with a template or an advanced version of a creature."
Can a wild shaped druid increase the size of the creature it becomes, for instance could they become a small wolf? or a huge wolf?
Short answer: No.
Reasons: Well, for one you have to be familiar with it. If it's not in the Beastiary, you aren't familiar with it. Second, polymorph magic forbids templates, which going to a larger creature (or smaller) would require. Finally, size affects AC and grappling, not just Dex and Strength.