There is nothing wrong with the dictionary definition of whence. What's causing confusion is the fascinating way in which returned whence functions.
First, I need to say that your sentence with whence initially sounded a bit strange to me.
One of the examples from the Merriam-Webster definition of whence is:
// They returned to the land whence they came.
At first I thought it was the returned to X in front of whence that was missing from your sample sentence that made it odd. But that's not what's happening.
The actual example sentence from your Oxford source is:
They returned whence they had come.
That, too, sounds normal to me. But your version of the sentence is still unusual.
So, what's different about them?
Oxford: They returned whence they had come.
Yours: Peter returned whence John had come.
Thinking back on all the times I've heard hence used in this way, I've only heard it used reflexively.
The actual sentence from Oxford, which sounds normal to me, is reflexive. However, your version is not. But after having sorted this out in my mind, and the more I think about it, the less it's bothering me. (Although it's interesting that you constructed something that I, as a native speaker, would have never thought of doing.)
So, let me turn to your actual question.
Here is your first sentence:
Peter returned from where John had come.
It would be incorrect with from which:
✘ Peter returned from which John had come.
You are right that from which could be used—but only if to the place is also used:
✔ Peter returned to the place from which John had come.
So, if we take your whence sentence, there are now two possible paraphrases:
Peter returned whence John had come.
- Peter returned from where John had come.
- Peter returned to the place from which John had come.
But even though both are grammatical, they mean different things.
Return to does not mean the same thing as return from.
When you return to a place, you go to that place. But when you return from a place, you leave that place.
To rephrase the two possible sentences:
- Peter left (the place) where John had come (from).
- Peter went to the place from which John had come.
This leads me to conclude that you're correct:
Peter returned whence John had come.
- ✘ Peter returned from where John had come.
- ✔ Peter returned to the place from which John had come.
What's interesting here is that you can't just replace whence with from where. You have to look at the syntax of the overall sentence. As such, we end up with this:
whence = from where
returned whence = returned to the place from which