Is it permissible to transplant hair for someone whom Allah created with sparse hair at the front of his head, and who has developed a psychological complex because of this, or is this considered altering Allah's creation?

There is no objection to hair transplantation for someone who is bald, whether the baldness is temporary or permanent. Both are defects that cause distress to the person, and it is permissible to remove them. Baldness is considered a defect that causes psychological pain and disdain, and hair transplantation removes this defect.