Your wife does not required to pay anything. But for more accurate advice, it is essential to go through the content of the appointment letter.
I fail to understand your statement - "If I declare the documents as misplaced and simply get new ones made, will that be illegal?" Which documents are you talking about?
There is nothing to worry. There is no employer=employee relationship estd as yet. The fact that they have already apptt. from the panel vice your wife should strengthen your defence. As such the U'sity has not suffered your wife not having joined the U'sity. Therefore at this point of time you need not hasten for duplicate documents. You should give a written letter asking them to return your originals forcibly withheld by them. If they refuse follow up with a legal notice and file case to restore the documents illegally held by them. You won't panic, sure to get your originals.