In a recent encounter a GM upgraed our daunting fear checks by 3 red dice because we encountered 4 wraiths at the same time.

He was going to make us throw a seperate daunting check for each one but then decided to upgrade the one check instead.

We argued that only one normal daunting check was needed since it was all the same source but the GM is the authorative.

Is this really how it should be done or is someone not understanding the rules fully?

In a later encounter we face a vampire, 2 death knights and more wraith. Needless to say one of our players rolled a despair.

What is the appropriate dice pool for these fear checks?

The rules reminder of NPC that trigger Fear checks: "If there are multiple sources of fear in the encounter, the opponents only make one fear check against the most terrifying enemy."

In the first instance there would only be one Hard (PPP) Fear check at the start of the encounter. No automatic upgrades.

In the second instance (not knowing what a vampire's fear level is) there would only be one Daunting (PPPP) Fear check at the start of the encounter. No automatic upgrades.

Hope your GM rolls with these rules. I would also argue that any permanents effects from those rolls, or closely tied, should be retroactively wiped clean. Hope this is helpful.

But if there are other factors in effect during the scene it could cause the check to be upgraded, have boost, or have setback dice added to the roll, just like any other check.

But just the fact there's more than 1 wraith doesn't RAW mean upgrades, multiple checks, or additional difficulty.