for school work proper grammar is important (coloring within the lines and all that crap). that said some of my fav writers break all the rules and do so brilliantly.
as to the opening question, I would try not to consider whether the client will make a fuss or come back for future work. flat out, what do you think is fair to do independent of all other considerations?
having not seen the text, I personally would not care about sentence length or amount of subheaders if you write powerfully and with seo in mind. the one thing that did stick out a bit was the passive voice issue. if this text is for sales, I'd do some rewrites gratis for the client just to spice it up a bit.
ultimately though, did you provide work that you consider high quality and fair for what you were paid?
if I were you would prob do some rewrites to address the main concerns to the best of my ability or offer a token of good faith partial refund, but if you feel the client is just being an unreasonable whiner then own your choice not to refund or provide any rewrites and state why. politely and with professionalism.
(had to work an over 20 word sentence in there)
hate shit like that though, you start out with good intentions and it gets unpleasant? not fun for either of you. had that happen once to me (a dude I hired for some work totally tried to rip me off for thousands of work I didn't need, want or ask for, just presented me a bill out of the blue that shocked the hell out of me) and it made my stomach churn.
it speaks well that this is an unusual situation for you. excellent service providers are worth their weight in gold, as are those who as clients value excellent service.
just make your choice on how you would want to be treated, were your positions reversed. apply reason and ethics to your decision on how to proceed
good luck with it, hope y'all can come to a conclusion where neither of you walk away feeling ripped off.