I was wondering if you play a challenge in a neighborhood and you complete it, is there a way you can reset that neighborhood so it'll have a clean slate when you play it again or do you have to play around your challenge gameplay?

If it's a maxis hood, you can download clean versions of them from MeetMeToTheRiver's Tumblr. They're like the ones you get when you install the game, except they're not (or less) inherently corrupted.
If it's a hood you downloaded yourself, you can take it out of your neighbourhoods folder and pop a copy from the zip file back there again.
If it's a hood you made yourself, then unless you have a backup you can replace it with, unfortunately you can't reset it.

Thank you so so much! I'm a big challenge player so I'll need to fix my neighborhoods a lot.

You can also reset to "factory settings" by removing (keeping as a backup, though) the neighborhood folder and running the game, which will make the game generate new default hoods (E, F, G and N001-3).

Using the fixed templates is a better bet, though - they fix a lot of bugs in the original neighborhoods.

Read this related thread here: http://www.modthesims.info/showthread.php?t=642536 for links to some cool stuff for what you're trying to do..