Perhaps it would have been better to use the sentence given in the original post.
1) The original sentence without a "fused relative":
The thing that he did to me was wrong.
Here, the clause "that he did to me" modifies "thing". It functions as an adjective.
2) The example sentence with a "fused relative":
What he did to me was wrong.
Here one word, "what", stands for "the thing" and "that"; "what" is a "fused relative". The clause "What he did to me" is the subject of "was [wrong]". It has a "nominal function" (acts as the subject of the sentence) and is a fused or nominal relative clause.