My wife is a “reformed” perfectionist. Earlier, she used to take it as a compliment, but now we both understand it is not, and she has worked hard at changing this trait. We have a four-year-old and a 10-year-old. I fear my wife has been (and I have let her be) extremely critical and demanding of our older child, in her bid to make her a perfect kid. I feel particularly bad about our insistence on cleanliness and tidiness. We used to make our daughter dust her room (every object in it), straighten it up, put her clothes and toys in designated places only, once a day from the time she turned 6. There have been times when we have stopped her from joining her friends and cousins for an outing because she hadn’t tidied her room, etc. While we have stopped this kind of thing, is there some way in which we can reverse the harm we may have done—and what exactly could be the harm done? She seems a sunny child, but isn’t so confident.

Clean sweep: Don’t use household chores to discipline your child.
It’s really good that the perfectionism was caught, recognized, accepted and worked on. That’s no small task! Typically, a perfectionist is an over-controlling, fearful and anxious person, for whom appearance is everything. Once she (and you with her) has “dismantled” this construct, she is actually now freed from her own extremely insistent “should” and “shouldn’t”, and free to be a more instinctive and ultimately more loving parent and person.
You ask what harm may have been done. Well, children of perfectionists grow up to be hypercritical of themselves, feeling inadequate and emotionally empty. And most importantly (and sadly), they are made to believe that love is completely conditional and dependent on their behaving extremely “well”; so they are almost always anxious to please. They tend to feel that the opinions of others are far more important than their own. They often feel that the world is watching and judging them. They carry this into their adult relationships and their own parenting patterns too.
But your child has been fortunate to be “let off the hook” very early. As for what you can do to reverse things, first, rest assured that the calling off of the demanding and uncompromising agenda itself must be going a long way in getting your child back into a more relaxed and less judged state.