I had this happen to me while playing the D.E. today, and I think the D.E. got it right.
Amazon: "If you are defeated or have a standoff in battle, you may ignore the result and immediately fight that battle again. Any effects, special abilities, Objects, or Spells used in the first battle remain in effect for the second battle. You must accept the result of the second battle."
Wand of Dragonfire: "You may use the Wand when you are about to engage in battle with a character or creature. Roll 1 die and add your Craft. If the score is higher than the character's Strength, he must lose 1 life. If the score is higher than the creature's strength, it is killed. Enemies killed cannot be taken as trophies."
So I went up against the Amazon, who had three lives. I used the Wand and took her first life. We then engaged in battle, which I won. She chose to redo the battle.
At this point I was given the opportunity to use the wand again, which I did, and I took her second life. I won the battle again, and took her third life.
Since the Wand is not used IN battle but BEFORE battle (i.e., "when you are about to engage in battle"), it is perfectly acceptable to use it twice under these circumstances. The Amazon's special ability explicitly states that it is a "second battle," ergo the Wand may be used twice.
I had never made the connection that this was a possibility, but I'm glad I did. It's just something to tuck away in the back of my mind in case it pops up again.