Daughter's horse, Mystie, is extremely - extremely -
spooky. I have never
seen a horse so nervous. She was abused for years and has serious trust issues that we are just beginning to work through. She's nine years old and has only been under saddle for about a year. (she was purchased from the abuser by a friend of my daughter's, who sent the horse to a trainer after surgery to correct the broken bones in her face from a baseball bat. Daughter became friends with her when she bought the horse from the rescuer.)
Mystie was spooky and jumpy when we brought her home, but she did okay under saddle until a couple of months ago when she had a major scare/panic attack. She's was virtually unrideable for several weeks.
I told daughter to try lunging her and sacking her for a while before riding her. They have slowly worked into a bit of a routine of tacking up and turning Mystie loose in the pen to get the "kinks" out - Mystie will run like she's panicked for a few minutes, then suddenly stop and "join up" with my daughter. Then she puts the lunge line on her and works her for a few more minutes before a sacking routine. (What would we do without Walmart sacks?) Daughter starts by slowly rattling the sack on the end of a fishing pole of all things, but it's longer than most training sticks, and more limber. When Mystie accepts that the sack monster isn't going to eat her, the sack is slowly worked toward her until Mystie will stand relaxed while it's rubbed on her and rattled loudly all around her and under her and over her head. Some days the whole routine only takes about fifteen minutes, some days it takes over an hour. Either way, by the time the little girl is settled, she can be ridden without trouble and isn't nearly as spooky.
It probably didn't help that daughter was inexperienced with horses and may have been unaware that she was pushing Mystie too far out of her comfort zone. Daughter is also bi-polar and has learned that the more stressed out she's feeling, the worse Mystie behaves. The lady that daughter bought Mystie from, and has become great friends with, has said she's seen remarkable improvement in Mystie's attitude.
I guess the point I'm trying to make is your horse feeds off of your attitude and moods. She also has issues of her own she needs help from you to work through. I can't tell you what will work for you to help your horse work through her buddy sour issues and her fear of going through water - but baby steps may be the answer.
If she's afraid of/refusing to ride out alone, you might try trailing her "in hand" a few times by yourselves. You don't have to go all that far - just far enough away that she's aware that there are no horses around and she's only got you for company. Once she's settled on trailing in hand, you can try mounting her where there are no other horses around. If she is a real problem, I don't think this would work, but you need to get her to focus on you instead of the other horses.
Once you have her focused on you and she's no longer buddy sour, crossing water can be handled in a similar fashion. I had a mare that refused to cross water or walk through the underpass that goes under I-40 near our house. The water issue was handled easy enough just by not letting her go anywhere else but forward through the water. Each time she tried to refuse and spin around, I just completed the spin until she was back facing the water. After several refusals, she eventually gave up and crossed the water. Each time after that it got a little easier until after a while she didn't even slow down. Remember that the water was there all along, the only difference was that she was being ridden.
The underpass was more difficult because she wasn't around it much. It was dark under the highway and the traffic passing overhead was loud. My horse wasn't a particularly nervous or spooky horse, but this was something she had never experienced before. I had to lead her through several times (and she refused to even be lead at first). Hubby's horse had no problems going through and eventually we could lead them through together. Once we had that down pat, it was back to the same routine I used at the water - I just wouldn't let her go any other way than forward under the underpass. It took a lot longer than with the water, but eventually, she would go under without issue - even when the stupid truckers would honk their loud airhorns.
It all takes time and patience - and a LOT of work. You are on the right track and you have the right idea. Selling your horse would just pass her problems on to someone else to deal with, and the horse you buy to replace her will have other issues that will need to be dealt with - so better the devil you know?
As for the biting and rearing, I really can't say how to deal with that. I've only had a horse bite me once - I was in the saddle and the stupid thing glommed onto my toe. I yanked it loose and kicked the snot out of his nose and he never did it again. I don't recommend kicking the horse, but it was more of a knee jerk reaction than anything - and it worked. I've had horses buck with me, but I've never had them rear up - that may require professional help, but if you really love your girl, then it may be worth it if she makes a habit of it.
Sorry to rattle on so long, though...