I have a tire 6581 which is stretched to the point it doesn't fit perfectly with the balloon designated for it, at one place it is kinda popped out. It is caused by my stretching it when I was younger for the sheer curiosity how much it can stand. Is there any way to undo this stretching and make the tire once again fit perfectly?
As someone already mentioned, I doubt there's any way to make it fit "perfectly" again but it may be possible to reduce the damage.
Another way to apply heat is to use hot water. As for how hot, I've got no clue what temperature that particular material starts to soften at, but I'd start out with the hottest water you can get from the tap and increase the temp gradually from there if that doesn't work. According to LEGO, 104F is the maximum "safe" temperature for most of their products, so it may not take as much heat as you might think. Since it's only a specific area, I'd recommend using kitchen tongs to hold the tire and dip only the area that requires softening in the hot water.
You describe it as both "stretched" and "kinda popped out"... without a photo, it's hard for me to picture what exactly the damage looks like. If it's to the point where part of the tire is misshapen rather than just stretched, a pair of thick plastic gloves (ie for house-cleaning) might allow you to reshape the damaged area while it's hot enough to be somewhat malleable.
You won't be able to make it fit perfectly again. If plastic is stretched over a certain point it is irreversibly damaged.
But you can try to heat it a little to shrink the wheel overall. But it's not guaranteed to work. If you use a lighter you can affect a smaller area but be sure not to burn your part.