Ignore raschemmel, their answers are just plain wrong in this case.
The 2.8A is max current your motor can take, and 2.5V is the voltage across the windings while doing so. Your stepper controller does current regulation through PWM, so as long as you configure it with a current limit of no more than 1A (or up to 2.8A if your supply can do that; that will protect the motor from overheating), your supply will not be overloaded. The supply voltage needs to be much higher than the 2.5V in order to overcome the stepper's inductance while PWMing; 12V is good.
You will probably want to read the controller datasheet.
The fact that it wobbles indicates you are very close. Check that the current limit is indeed low enough (try about 0.3A) because if you overload your PSU it will probably be shutting down. It seems that you must manually set the current with the PWM setting yourself which is kind of bad because you need to apply more PWM power when the motor is at higher speed to achieve the same current (torque) while overcoming back-EMF. Anyway, try setting the PWM duty cycle to about 10% (26?), which should get you maybe 300mA per winding while stationary. You won't get much torque but that's OK.
Your wobble is probably because your step sequence is wrong, you have it going forward two then back two, etc. I think the way you have it wired is that "motor 0" is winding A, "motor 1" is winding B. Your main loop does this sequence:
+A/-B
-A/+B
etc
when what you need is:
+A/+B
+A/-B
-A/-B
-A/+B
etc. Note that only one winding changes for each step, and the direction that you proceed through this sequence defines the direction the motor goes. And change your loop delay to 10ms per step, it should start spinning slowly.