Thank you for taking this girl in. It is so rewarding to watch a rescue dog come into their own. It can take time though.
As others have mentioned, it very well may be she was exposed to a trauma that is producing this reaction. As cowpony mentioned, a history of being in a confined area and unable to get away from a bug sounds like a very real possibility.
I wouldn’t hesitate to try drugs to help her with the transition. Natural remedies may work as well, but you may need the bigger guns. She can’t train until her anxiety comes down. Think about situations where you learn well. When people (and dogs) are overly anxious, they’re not in a space to learn. You can do that through meds, a soothing environment, or a combination of the two. Once you get her anxiety to a manageable level, then train and train. That will help her confidence.
There are stories here of folks who have managed anxious dogs, As Dechi said, she has a lot of posts. Time and patience are essential. Here are a couple things I did with one of my rescue dogs, maybe it will help you.
Lily, a stray in a large city, was very fearful of noises, and strange things- like having to walk under a bridge. She was also intermittently terrified on car rides, and it was hard to pinpoint what about the car ride would trigger her panic. After trying many things ( ex: thunder shirt, lavender oils, rescue remedy) I resorted to medicating her with Acepromazine for longer car rides, which is definitely a heavy hitter. I used it about five times, and she was dopey, but we were able to take her with us on vacation, which was nice. I then tried without it, and she was better, and continued to get better. Now she rides in the car without a problem, but it took a couple years. I don’t know if the Acepromazine helped bring her anxiety down enough to for her to realize she probably was going to survive the experience, or it was just a matter of a number of positive experiences layered on top of the bad ones that allowed it to recede.
Lily had a number of fear based behavioral issues we worked on, this was just one example. Time, patience, and creating an environment where they feel safe are the magic bullets. Training is important, but feeling safe and trusting you is the foundation.
Here is Lily at 10 1/2 in her usual place, on my lap. I think she knows I’m writing about her, lol. However, it took her at least a year to decide I was safe enough sprawl out on my lap for any length of time. She started out by sitting for a couple minutes, and it was evident she wanted to trust, but initially, it only lasted a couple minutes, then she would go back behind the couch. Gradually, she spent more time out in the open and now is a permanent fixture on my lap, and just a happy dog overall. She now competes in agility and confidently prances through a large crowded agility event with hundreds of dogs and people. It amazes me that she has come so far.
It’s very rewarding to help a dog get over fears, but it can also be exasperating and try your patience. It helps me to think about where they were a month ago, six months ago, etc. then you see the progress. Good luck with her, keep us posted.