Hi there
Thank you for your email.
Before i start there are a few no no's i picked up from your email.
Putting rocket on Dave's lap isn't a great idea, although a lot of dog behaviour specialists would recommend it. This is called the flooding method. Imagine you are scared of spiders, well in this method to solve your fear of spiders we would put you in a room full of them. It isn't going to help and probably make things worse.
The second thing is never comfort Rocket when he is scared, this only encourages him to be scared. When he is acting scared ignore him (don't reprimand as this usually makes things worse) that means turning away, no eye contact, not talking to him or petting him.
It is great to hear how much you have tried with these two and it helps convince me you are committed

It also helps me focus what i would recommend.
So here is what i would suggest. Firstly i think you need to find some clean bandages and other such things that smell "medical". If the fear is based on smell having these items around the house when Dave isn't there may help. Putting the items in a non-fearful situation eg in an area he sleeps, or plays or eats will help him dissociate the smell from the fear.
Play with the bandages with him to show him they are fine. If he becomes scared ignore him as above. Give him no attention at all. But the second he starts to come out of his crouch, put his ears up or show confidence you must reward him quietly. This will encourage confidence not fear.
I would also recommend trying to get hold of some crutches. Again put these in a non-threatening situation as above and get rocket used to them. This may also be part of the fear.
Now try and do these things before Dave comes around next. If you are half way through desensitisation when he comes around you may be back to square one.
Now to Dave.
*Get Dave to come and visit (make sure that you tell them what is happening!). He must be quiet and make slow movements around the house. Sudden movements and loud noises can make things worse
*As your friend knocks on the door or rings the doorbell, make Rocket sit and give him a treat. Then put your dogs collar on and take him to either a crate or a secure room. If your dog is too much of a handful at even this stage then you will have to put Rocket away before Dave gets to the door.
*Sit Dave down in a room that is not often use by your dog. Give you friend some treats so that they can give them to your dog.
*Go to Rocket and make him sit. Put a halti or muzzle as well as the choke collar on. Get Rocket to heel then take him into the room that your friend is in. Make sure that Dave does not give any eye contact. Act as happy as you can while petting your dog.
*If Rocket growls or disobeys your commands at ANY TIME then squirt him with water or shake a pebble filled can to startle him. Have the water pistol or can in your dogs view at all times.
*Make Rocket sit quite a long way from your guest, perhaps in the doorway of the room. When your dog is calm get it to heel and move it closer, then get your dog to sit again. Praise him when he sits and heels properly.
*When your dog is calm and you have moved him to sit within 5 feet of the guest then get Dave to give your dog a treat. Make sure that Dave does not look your dog in the eyes.
Preferably you will repeat this twice a day for several weeks. That may not be entirely practical for you but will give you the best chance of success. Hopefully this advice will help you, remember to be patient this may take some time. Good luck and please let me know how things go
Kind Regards
Todd Field