It is different working with an abused horse rather than an unbroke horse. Abused horses, like in this case, do not need another human forcing it's dominance at it. It doesn't need to see people always as the dominant force, it needs to learn to see them as a companion as well. Horses in the wild, they have companions. Yes, there is always a pecking order, but within that order is friendship. There is alot more to horses than most people realize, and it isn't always about being making sure you're "in charge". Why not be a friend? A source of confidence? Something this little mare can look forward too. Not another lesson on human making sure horse feels inferior.
Sure, with an unbroke, ignorant, and uneducated horse who shows these symptoms I would agree completely with what you are saying. Abused horses, however, require something different that not every horse person is able.
You must do whatever it is that is appropriate to the horse. Not one method works for the same slew of horses. In time, BurningAmber will be able to move on and teach her mare to accept different things as their partnership progresses.
But for now, if she were mine, I'd show her some TLC and an understanding of where she is in her life.
One more thing, Burning Amber, if you have any other horses around, if it is possible to stick a friendly mare in there with her. Not aggressive, preferably. That mare will show yours slowly but surely that humans are ok. If you walk in there and the other mare comes to you looing for a scratch or a cookie, yours will get curious and want some too. Just an idea, if you have the facilities or the horses! :)
In riding, a horse's energy is like a river- guided by the banks but not stopped by them.