I haven't read through the whole thread yet, but PLEASE don't do any negative corrections on your dog. He is in the process of figuring out what is safe for him in the world. He is shutting down from fear. Correcting him will only teach him that he should fear you as well. Cesar Milan may be the most popular dog trainer, but his methods for dog TRAINING are really not helpful and a large majority of the dog training world considers a great deal of his work to be based on outdated wolf-models and to be abusive. The stuff about being calm, and not working in anger, and giving your dog lots of exercise are all good though.
I adopted an abused dog a few years ago. He wouldn't walk, he lost bladder control if anyone looked at him, he would shake with terror at the sight of anything new. The best advice I got was to buy the book "Culture Clash" and read it. The book is annoying, but every single thing she has your do worked for my dog.
For now, it just requires immense patience. If all he is ready for his to step out in to the yard, then just sit there calmly with him until the fear passes. You don't need to talk, or pet or anything. Just be calm and confident and he'll start to feel it.
The other important part is to find out what motivates him so you can start to reward behavior that you like. Does he like a frisbee, hotdogs, or perhaps just be allowed back in the house?
If it helps, my dogs is now an amazing, happy, relaxed beast who loves people and dogs. It takes persistence and patience, but once dogs know that you will NOT HURT THEM they relax a bit and can start to think again.