Agreed for the most part. However, calling the police on her is a bit extreme. She didn't kill someone, she found a wallet and kept it. Wrong, yes...but again, calling the cops is extreme. I don't think threatening people while knowing you won't follow through is dumb. So, saying "I'm gonna call the cops if you don't return it" is lame since he probably wouldn't call anyway. Enough on that point.
If I were in his position I'd take the wallet from her and return it to the police myself. If my significant other had taken the money out, I'd probably replace it myself. All I can do is think of myself in such a position and how angry I'd be at myself and how violated I'd feel if someone felt entitled to my money. If I couldn't get the wallet (even w/o the cash) from her I'd walk away right then and there.
On that note: "finders keepers, losers weepers" doesn't actually hold up under most circumstances. It does if the property is determined to be "abandoned." I'd be hard pressed to believe that a judge would rule in favor of the gf by calling the wallet abandoned (this is why you should file a police report if you lose your wallet).
And oh yeah, I'd dump her. The key to Prudie's response was along the lines of "to your knowledge she hasn't done anything like this before." That's reassuring. What has she done that bf doesn't know about...Prudie: If a person keeps someone's money b/c they "need it" that person is a thieving, dishonest cad. I'd dump her faster than she could get the credit cards out of my wallet.