Severe is listed as 120 XP, but what's the 1 for?
The number tells you what party level the encounter is 'Severe' for -- here, for a party at level 1. The same encounter would not be a 'Severe' encounter for a level 2 party.
They're listed as "Creature -1" and "Creature 2" respectively, but I can't find a CR table anywhere here or in the Bestiary.
What you want is the XP table in the Core Rulebook on page 508, and the encounter budget table on page 489.
Page 508 tells you what XP a given creature is worth: it's always relative to party level -- a creature at party level ("Creature 1", for a level 1 party) is 40, and a creature two levels below party level (here, "creature -1" for a level 1 party) is 20xp. That counters towards your encounter XP budget -- here, 120xp budgeted for a Severe encounter.
Page 489 tells you that adjusting an encounter to keep it Severe requires adding 30xp per player (or removing 30xp per player if you're dropping below 4). You could add a mangy wolf and add a template to bring it up to Creature 0 (1 below party level, so 30 xp) or just add a regular mangy wolf and call that close enough.
Anyway, so the encounter is 120 XP for a four person party, I believe. So that's 30 each.
Whether you add a wolf or not, you award the encounter XP to everyone in the party -- that's 120xp per player, since that was your original 4-person encounter budget.
You can also run Plaguestone with milestone leveling if you want -- the points in the adventure where encounter budgets switch to 'Moderate 2' are where players, approximately, ought to be 2nd level.