When Willow discovers Oz and Veruca, they are naked, but you can see that Paige Moss (Veruca) is wearing nude-colored underwear.
As leader of The Initiative, Walsh would have to know about werewolves, as another HST. This means she would not be having the conversation with Riley, but it's a plot device to alert Buffy to the presence of the werewolves.
When Oz and Veruca wake up in the woods after their first meeting as werewolves, you can see Veruca is wearing white pants or a towel behind Oz on left side of the scene As werewolves they should both be naked.