Re: Rugging up a nervous horse!!!
It sounds like you could do with doing lots of ground-work to desensitise him in general.
With a horse who is a nervy character (like your boy sounds), ground work can really make a massive difference to them, espeically in your relationship together as he will start to trust you more which will eventually translate back to your ridden work.
How is he with stuff on his back in general? Will he let you put a saddle cloth up there? I would take it back to very very basics...have him in a headcollar, preferbaly in a safe area like an arena, and have your rug (use something like a light fleece/cooler which is easy to put on) on the floor in the centre of the ring, with something like come carrots on top. Lead him up to it and let him sniff it and get the treat.
Next pick the rug up. If he backs away, move with him but don't attempt to put it on him. Don't look him in the eye or putthe rug down. Keep your posture relaxed and your shoulders slightly turned to him...but not squared up. When he stops moving his feet, put the rug down and give him a pat. Keep lifting the rug up and repeat what I've just said until he stops reacting when you pick it up.
Next, put the rug against him. Not up on top...just held against him. Again, if he moves around, keep it held on him and as soon as he stops, take the rug away and give him a pat. Repeat this step until again, he does not react. When he accepts this calmly..put the rug up onto his back, near the withers...about where a saddle would sit. Repeat what I've said about leaving it there until he is still and then make a fuss of him.
Noticing a pattern yet??? Basically, you want to ignore bad behaviour and reward postivie behaviour. I.e. he should stand still when you put the rug on him. It will take LOTS of practise and patience....but remember that the more time that is invested in this, and the less you do it by force...the more positive the outcome is likely to be.
Reading your last post...re the lunging. It's important again to keep them out and stay there!! Not the easiest with a horse who likes to turn in. Most horses do this because they are confused and often, if you let them...they'll just come right up to you! If you can get a helper. Position them on the opposite side of the horse to you and have them walk round with him until he gets the idea. But remember you are controlling him NOT the handler, so lunge as you normally would...whip to his shoulder and then flick out to send him forward. Make sure that you move around to make sure you are always behind his shoulder as the second he gets behind you he'll stop and turn in.
With a new horse, especially one who is nervous, of who has been badly handled as a youngster, it is really important that you're fair and consistent when you handle them so they learn the boundaries nad what the expectations are.