Does all wet drywall need replacement, or can it be dried and repaired?

It depends on the water source, material condition and access for drying. EPA's clean-water guidance allows some wallboard to dry in place when it is not visibly swollen and its seams remain intact; contaminated water and existing mold require a different assessment. Ask the contractor to explain each removal decision and show the affected areas. Painting over mold or sealing damp material is not a completed repair, and the moisture source must be corrected.