At the very minimum, the act itself is certainly a violation of some sort. (No, peanut gallery, please do not entertain us with any pictures of people sitting in overheads - that's not the point.) That is, if it did happen. But assuming that it did....
If the father was doing it first then the FA joining in doesn't give the latter any mitigating circumstances. The FA instead should've been scolding the father for doing such a thing in the first place, citing air safety procedures. So the FA is not free of blame at all.
The estranged father is an idiot as well however it's going to be impossible to make him accountable to any kind of violation of law or regulation unless the child was hurt (in which case it sounds like the child wasn't hurt). The airline however could've prevented this whole shermozzle if the FA had just told the father off for putting the child up there in the first place.
Now as for the mother or the child (to a lesser extent) experiencing psychological damage as a result of this incident? That's pure hogwash - yes, that's a broad brush statement, but the feeling out of all of this for the mother I would've thought would be rage, not anxiety. Again, it's not as if the child was hurt or locked away without oxygen for a sizable length of time.