I feel your pain! My Lila is timid as well. She has finally come to trust us and our movements/actions, but when she has the freak out it's so frustrating. It feels as if you've lost 13 of the 12 steps forward!
We can actually make the timidity worse by our reactions. I am not saying you are, just suggesting that perhaps you might be.
You KNOW this is what he does when you take off his collar, so you go into it with the notion that this event will likely occur.
Try going into it knowing it won't. Calm. Quiet, NOT timid, measured or slow as this appears, to the dog, to be insecurity.
When Lila first came home my kids would hesitantly attempt to pet her because she was so 'scared' they didn't want to frighten her away. But thei timidity actually made her worse. I likened it to an appointment at the doctor or dentist, where you were very concerned with the outcome. Would you rather have the doctor or dentist walk in timid and unsure, or very sure of himself? I think we would all prefer he at least LOOK like he knows what he's doing! Same with the dog.
Everything about YOU needs to be calm and sure. Be very aware of the energy you have when working around or with your boy. As easy as it is to get frustrated, don't. Correct the behavior you don't want and praise what you DO want.
What I have done with Lila is teach her no matter what, the 'sit' assures she will be fine. No one will approach her, nothing will get her as long as she sits. It has kept her from running and hiding and avoiding people. When someone comes in the door, she comes into the room, approaches and sniffs as long as they don't try to pet her, and then she sits beside me (or, surprisingly, between them and me). If someone is trying to hard to pet her, she comes to me and sits. They won't ignore my words when she is that close to me (amazingly, they do otherwise)
Maybe work with those things. Teach him a default. Don't let him hide. Don't be afraid to 'correct' the fear behavior. He needs to know that is NOT what you expect from him. Be kind and gentle, but never timid and always firm.
Keep taking the collar on and off. Sooner or later it will sink in. To avoid taking it off isn't solving the issue, which is the piddle/run/hide. If he was mine, I would also keep him attached to me by a leash. Always. Work on leash training in your day to day until he gains some confidence in you. Teach him commands, give him a job, assure him that you are in control of the situation and he has nothing to worry about as long as you are there.
Good luck and please update. This experience with Lila has taught me so much.