my engineer wants me to nail my shear at 2" oc. Doesn't that tear up the 2x4 and plywood??

Not sure what you are saying about 2" oc!!

the ply is 4' x 8' if your studs are 16" oc then you would nail the sheer at 16" oc

Unless you are refering to the vertical nail pattern of one nail every 2"

Overkill! Unless your in Tornado Alley! Then use construction adhesive plus nails!

Use ring shanks! And put at least 16 nails down the 4' of sheer for each stud in normal wind sheer zones

Check to see what zone you are in!