That cite, if I recall correctly, basically says that people that think that their intelligence is fixed are more prone to those sorts of problems. One way around the problems would then seem to be to teach your kid that his intelligence isn't fixed.
In fact, that seems to be true in reality depending on how one defines intelligence, and whether one sticks to a practical discussion.
For your son, I think a few things may be important to keep in mind:
1) Your son needs to feel valued, to feel a positive reward of some sort (which can be just your appreciation), even when he fails. Perhaps, especially then. A good first thing to try is to praise him for trying.
2) Your son may be over-emphasizing the consequences of failure. He probably feels like HE is a failure, and/or that you think he's not smart, etc. He needs to learn that getting one tiny thing wrong is no big deal. Perhaps telling him about the many mistakes of great people throughout history would help; brilliant people fail all the time, though their successes are awesome.
Take away the stigma of failure on a task in any way you can-- be creative. Communicate to him clearly that you love him not because he is smart, but because you are his mom and he gets unconditional love no matter what; and that in fact just being smart is no big deal, it's what you do with it that matters. Get him psyched about doing something great with his life, not about being smart; de-emphasize that.
I'd specifically do more things with him that are not pass-fail, like art, and praise him whenever he focuses and tries hard. Don't just praise the result-- praise the effort (although I would of course praise any tendency toward improvement in any area).
If there is a failure-possible (or, even better, failure-prone) activity he is willing to still work at, I'd do a lot of that. Again, praise his effort, and then when he stumbles and overcomes an obstacle, praise him and his attitude, not so much the result. I mean, you praise the result, but emphasize that it's the result of the winning attitude and effort.
Also, try to find activities where things are not meant to be perfect. Anything with mocking-up or models as intermediate stages may help. For example, you can storyboard a book if he is perfectionist about drawing; have him do rough sketches of each panel, only later drawing the actual book.
For reading, specifically, you can introduce more phonics / phonetics teaching. You can propose this as an empowerment strategy, so that he's better-equipped when he faces a frustrating word, emphasizing of course that it is good to prepare and work hard, because reading is hard work. (Sorry for being so blathery in this post, but hopefully you more than get the idea by now. You are sending multiple messages with this sort of approach, including that you understand a task is pretty tough, lessening the perceived consequence of failure in front of you/others; that preparation/effort improves the chance of success; etc.)
These are pretty good in my opinion, and may quickly result in an increase in his ability to sound out new words:
http://www.amazon.com/Phonics-Made-...mp;s=books&qid=1282051974&sr=8-1I agree with no5no5 that it sounds like he's sufficiently on his way with the reading, so that you don't have to push, and I'd stop doing that. Encouragement is another thing, of course.
I am teaching my son programming, which is pretty good for counteracting the negative side of perfectionism. There are plenty of chances for small formatting errors, but they're easy to explain as of little to not consequence; that's why there are compilers, I tell him, to catch the little mistakes that humans sometimes make. But at a macro level, programming is creative in nature, which is non-threatening and satisfying to him.