I note that the user who raised this no longer has an active account.  However, I have removed the citation request as it was placed in an inappropriate place in the article.  That wax type cylinders were shaved so that they could accept new recordings is not in doubt.  Practically all phonographs sold prior to 1903 were equipped with such a shaving device.
As whether worn out cylinders were accepted back for shaving and re-recording: it is probably unlikely that a firm citation will come to light (which is often the case with such historical articles).  It is something that I had heard of from elswhere, but consider the following.
1. A cylinder would cost around 35 cents at the turn of the 20th century.  (To provide context in real terms, 35 cents would have bought you two dinners at reasonable diner.)
2. The early cylinders had a very short life of between a dozen to two dozen playings.
3. For all his faults, Edison was a very astute businessman.  
If Edison figured out that he could sell more cylinders by taking back the worn out ones and making an allowance toward the purchase of a new one, there can be little doubt that that is exactly what he would have done.