I assume first 3 statements apply to you and only the final one to your wife. Also, that you made your contribution IN 2012, not 2013. If so,
1) For you - as explained you VG has processed a return of your 2,820 excess with earnings, but instead of sending you the money, the total was applied as a 2013 Roth contribution. If so, you would report the earnings of $565. on line 15b of Form 1040. There would be a 10% penalty on this on line 58 as well. Attach an explanatory statement with your return explaining the amount and dates of the withdrawal of the excess contribution of 2820, and the amount it was worth when withdrawn (3385). Do not mention the 2013 contribution it was used for.
2) For your wife - assuming that either one of you is covered by a retirement plan at work, her recharacterization would result in her TIRA contribution FOR 2012 not being deductible. She would report 2,820 as a non deductible contribution on Form 8606 for 2012. Also an explanatory statement indicating the date and amount of the excess Roth contribution and the date and amount it was worth when recharacterized as a TIRA contribution.
Nothing will be reported on your 2013 return, even though you both with get 1099R forms in Jan, 2014. They will be coded to indicate that the corrective distribution and recharacterization respectively apply to 2012 and you will have completed the reporting on your 2012 return.
If any of my assumptions are incorrect, please advise.