rescue BC afraid to venture outside yard

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Hello, all:

This board was a huge help for me a few years ago when we adopted a rescue dog who was thunderphobic and obsessed with the moon. I'm hoping you can help with our new rescue, a two-year-old tri named Morgan. He is a dream dog: affectionate, great with other dogs and people, easy to train. The one problem is that he is afraid to venture far from our back yard. He came from a puppy mill situation in a rural area, followed by a few months in a very good foster home. He's afraid of so many things: bicycles, crying children, car lights, you name it. I thought it would improve with time but we've had him for eight months and he still shuts down after a few feet. We're worried about him getting enough exercise (although we do play frisbee with him in the yard) and it's tough to work on leash training when he shuts down. Suggestions? He loves riding in the car and will go for longer walks/runs when we're in the country.