I agree with TheLovedOne...you HAVE to leave his past behind him; he will continue to act the way he does ONLY because you allow him to remember those things. Act like they didn't happen, and help him get over them by using the tools you have at your disposal; since you have the Parelli levels, start there.
You can get a cheap 'handy stick' at a fleet farm or tractor supply company...I have one that I spent like 7 or 8$ on, from the cattle section; all I had to do was add a string to it; it's more bendy than the normal handy sticks, but it works.
You can get rope halters from fleet farms too, that could suffice for now for fairly cheaply.
As far as him not being able to eat hay...have you tried moistening hay pellets? And maybe feed those outdoors while he's outside during the day? This could be given as a supplement, so he is not having to "just" eat the grain a couple of times a day. You may even try moistening hay cubes...
That will also be alot 'cooler' calories for him, too, than the feed, so may chill him out some.
"The ideal horseman has the courage of a lion, the patience of a saint, and the hands of a woman..."