peacefuleasyfeeling, I'm sorry your DD is going through such a hard time. Just a few things I was going to suggest. If your DD has a list of things she is concerned about because she feels she can't do them, what about writing those things down and then little by little tackling each thing on the list until she feels she can do them and cross them out one by one. At the same time, write a list of the things she can already do. For each one she thinks she can't, write on the other list something she has already mastered. This will give her some perspective that just because she cannot do something now it doesn't mean she won't in the near future.
Also, from that list of things she feels she cannot do, and the things the teacher has mentioned she should be working at home to improve, you can have an idea of what she needs a bit of help with at home. As you have decided to take a step back from the daily homework and value other ways of learning that could be more fun than homework, use those fun activities to work on those tricky things at home. E.g. when DS was in Year 1 I realised he didn't know the months of the year in order in our language (probably the same in English) so we talked about those in the evening, listened to songs, made up games, and eventually one day he could say them all by himself and was very proud of it. Same for the days of the week, I would ask him to say them in the car on the way to school, and if he got one wrong he had to start again and we laughed about it. Once he was very good in knowing the order, I could easily ask if today is Friday, what day was two days ago, etc. But also, I would use opportunities in daily life like we are going to the beach on Sunday, how many days from today is that? And he would work it out and practise without having to be a homework.
Addition, subtraction, times tables, numbers bonds, fractions, we made lots of games around those. Card games, dice games, board games, etc. I would see something he was interested in (e.g. superheroes) and think of a game with those to practise adding points, or whatever we wanted to practise then.
Reading, what you are doing is fine. Let her choose her books, read as much as she is comfortable with, and read to her as well so that she can enjoy stories that might be more challenging for her if she were to read them by herself.
Writing, again, lost of fun ways to incorporate writing into daily life, like I'm sure you are doing already. Maybe get a chart of the alphabet to have in front of her desk or wherever she likes to write. That way when she is not sure how to write a letter or if it is reversed, she can check and self correct herself. I did this with DS1 and numbers, and I think it is normal at that age to still reverse some letters and numbers.
Keep working in her confidence, remind her of all the things she can already do that she found hard at first. I do this with DS when he complains something is too hard. For example, he didn't like joined up writing at first, and it took a lot of effort and concentration to write a word and remember how to do all the joined letters and would say to me why he had to do it when he could write print much quicker. I said that joined up was slow for him now because he wasn't used to it and was learning to do it, but that when he got the hang of it, he would see it is actually faster. And I reminded him when he was one year old, he could crawl very fast and didn't want to walk at first because one or two steps at first took a lot of effort for him when he was learning to walk and it was slower. But now not only he can walk but he can run very fast, and wouldn't even think to go back to crawling. I always use it as an example of the things that he found difficult at first but after perseverance became an expert on them and does them naturally now without giving it a second thought.
I hope things improve for your DD soon and she doesn't take it too hard on herself.