My iPad Air has a small keyboard now. 2 finger spread doesn’t help, nor did restart. Help!

Have you tried a forced restart to see if you can do the 2 finger spread after that?

1. Press and quickly release the volume button closest to the top button.
2. Press and quickly release the volume button farthest from the top button.
3. Press and hold the top button until the device begins to restart.
4. If your iPad doesn't turn on, follow these steps to check your hardware and charge your device. You might need to charge for up to an hour.
5. If your iPad still doesn't turn on, learn what to do.

Have you enabled the Scribble feature? This feature uses a different mini-keyboard that does not respond to the two-finger zoom or pinch gestures.

Settings > Apple Pencil > Scribble - set to OFF

Otherwise, to restore the new Floating Keyboard to the normal on-screen keyboard presentation, use the two-finger “zoom” gesture (i.e., the reverse of the two-finger “pinch”).

If the Split Keyboard is restored instead of the full on-screen keyboard, you can either use two fingers (one on each of the two half-keyboards) and swipe the two halves together - or touch-and-hold the “keyboard” key, then slide your finger to the Merge & Dock option and release.

Use the floating keyboard on your iPad – Apple Support

Split and move the keyboard on your iPad – Apple Support

Try to reset all settings to see if the keyboard shows normally. If it doesn’t help, contact Apple.

How did it start happening to you? Did it just happen out of the blue while typing? Now, what happens if you tap and hold the hide keyboard key? You should then have the option to expand it in fullscreen. If it doesn’t, then I don’t know what could be possibly wrong with your iPad.

Hope it helps.