I recently had to partially rip out the dry wall and insulation from an inside wall that joins to the garage. The outside wall had a styrofoam layer to it. My tape measure says it's 1 inch thick. Is use of styrofoam in this manner normal? I suspect it's foamular, or something similar. I looked at home depot and they don't carry it in 1 inch thick. It's 1/2, 3/4, or 2'. Is this the right stuff? I can't find full sheets of this anywhere, only 2x2.
No, putting rigid foam panels between studs is not normal and not a particularly performant or cost-effective way to install rigid foam. There's no reason to replace it. If you want a really nice wall stack-up when it's time to repair the damage, fill the stud cavities with Roxul mineral wool batts (may be a special order, but worth it since it's so much better than fiberglass batts), cover the entire wall--studs and all--with 1+ inches of rigid foam or rigid mineral wool (the more the better), and then apply 5/8" fire-rated drywall over that.
My local Home Depot carries 4x8 sheets of foam, but if yours doesn't, try Lowes, Menards, or a local lumber yard or building materials supply shop.