I just received a book that was a larger than normal paperback.  It's in good shape no damage, but it appears that the sender printed out the address label on legal size paper to wrap the book in.  I thought that only regular sized paperbacks could be wrapped in the PBS label. 

If there is no problem with the book,  as you indicated, then no, it should not be marked as RWAP.  Any book can be wrapped using the PBS label, btw.

If the book is not damaged you should NOT mark it RWAP.

You can't mark a book RWP for bad wrapping unless it was damaged.  PBS doesn't have any sort of wrapping requirements other then that you don't put tape directly on a book.  THey don't even require wrapping in plastic.  When I receive a badly wrapped book I mention it in the comments to sender section.  I just politely say something like "thank you for the book. I just wanted to let you know that the wrapping the book t his way is not a good idea and had hte book arrived damaged due to inadequate wrapping-I would have marked the book RWP and asked for my credit back". So far I haven't received any responses to that but I figure I'm at least warning them.

Ok, thanks.  I just marked received and will not worry about it.  The book is fine.