Drafty, didn't read all the posts here but I had the same problem with my young one, couldn't get him far enough away from me to lunge. (No skill with free lunging...) I had to take him to the trainer anyway, so I just let him deal with it and he did. But my nugget of info here is that the trick seems to be to tap on the shoulder, instead of the belly/hip which I had been doing when I need him to move out away from me.
I can use the lunge whip on the ground near his front feet, if he's working out away from me (but I want him to go out farther) or I use a tap-tap on his shoulder when he's in close. For close work, of course, a lunge whip is too long for the pocket pony and I use a dressage whip or my carrot stick or the end of the rope. This wouldn't win any horse show awards for form, but it works great for me.
Good luck with this!