I think you should definately look for another class..maybe do a 1 on 1 behavioral consultation with a trainer, or look for a class that has a basis on socialization. If money is an issue, give your county's animal services a call...where I am, the county offers $4 obedience classes. Shelters also sometimes have cheaper classes, and more of a variety of them also.

Is there anywhere you can go and just play ball on pavement? You could also do desensitizing...which it sounds like you are already doing this. Does other footing do this? Try putting a tarp down and see if he'll walk over that. What temperature is the pavement? Is it too hot for him? Or does he have any cuts or sores on his paws that the pavement is aggrivating? It dosen't seem he has anything physically wrong with him, but rule out the physical first. And what about a friendly, playful, confident buddy to go out and walk with? Have a friend bring along their dog...yours might relax when in the prescence of another canine.