I strongly recommend taking Spell Focus (conjuration) and Augment Summoning, make everything he calls in with his summon nature's ally spells stronger and harder to kill. If you have Complete Divine, give him the Natural Spell feat by the time he's 6th level, so that he can continue to cast spells while in wild shape.
If you don't have it already, get the Spell Compendium. It has a large number of spells for druids that simply make them nasty to deal with. Nothing like casting slime wave in a closed-off area to make all the players flinch, and at least two players should turn green the first time your druid casts infestation of maggots.
Player's Handbook II also has an interesting variation for druids, in which they lose the standard wild shape ability to get combat-oriented shapeshifting at first level. While they can't use the Natural Spell feat with this option, it would make going toe-to-toe with the druid far riskier, and when he's higher level they may not even be able to get into melee with him.
Basically, stock this druid up with buff spells (especially magic fang) for his animal companion. Throw in some spells to turn the environment against the party (even entangle is still useful at mid-level play). When he reaches 6th level, consider giving him Leadership and making his cohort and followers various animals or low-level help (such as fighters, rangers, rogues, or low-level druids). Assume this druid will use whatever means he can to keep tabs on the group (spells such as animal messenger from an allied ranger help, as well as speak with plants). When he's able to wild shape, have him change into something the PCs won't expect to be the villain (such as an eagle or donkey, or a squid or porpoise if they're near water). As long as he has a general idea of where they're going, he can keep watch on them without having to be obviously following them.
With judicious use of charm animal, speak with animals, dominate animal, and summon nature's ally spells, he can basically have them worried about stepping outside the city. Even then, they'll be worried about all the cats, rats, dogs, and whatever else tends to be in town.