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(comment this above was referring to has been removed)
About refunding to the payment method or wallet, some limitations may apply.
http://store.steampowered.com/steam_refunds/
You will receive the refund in Steam Wallet funds or through the same payment method you used to make the purchase. If, for any reason, Steam is unable to issue a refund via your initial payment method, your Steam Wallet will be credited the full amount. (Some payment methods available through Steam in your country may not support refunding a purchase back to the original payment method. Click here for a full list.)
EDIT....
However, you can refund wallet funds. But again, limitations apply.
http://store.steampowered.com/steam_refunds/
Steam Wallet Refunds
You may request a refund for Steam Wallet funds within fourteen days of purchase if they were purchased on Steam and if you have not used any of those funds.
Please note though, that I have never tried this myself, so I am not quite sure if this approach would work, but it might be worth a shot.
Nah... The wallet funds were used. Once they are touched, that's it.
Add wallet funds with card.
Buy game with funds. <--- This is when the funds were used.
Refund game and money back to wallet. No longer new.