How can I stop now playing from taking over my iPhone wallpaper?

Since I cannot remember about the size of that Music playing screen change, try a Force Restart on your phone. Force restart iPhone - Apple Support

See if that clears it up. Otherwise we have to see if someone else can remember how to reduce that page.

EDIT: I just found a YouTube video, but I cannot share that link, that says to tap on the album art and it should reduce it.

My guess here is because you are in Work Focus. With Focus on you will not see your lock screen normally, but when you tap on the screen and are listening to music, new, podcast, etc. it will display that Now Playing piece you are seeing towards the bottom. I don't use a Work Focus, but try turning off your Focus and see if you just see your lock screen wallpaper when the screen is locked and you tap on it.

Here is what I see on mine. There must be another setting for that full screen and I cannot think of it right now. Maybe someone else will post it.

Glad to hear that you got it all sorted out.