There are many species of wasps that use pre-existing holes or bores left by boring insects to their own purposes by capping off the entrance with mud AFTER they have laid in a clutch of eggs along with a cache of food for the hatching larvae to eat.
The tiny worms (caterpillars most likely) had probably been stung and paralyzed by the wasp to provide the hatching eggs with a meal. They sting the prey just enough to paralyze it so it will not just rot (which would kill the eggs).