I've been working with him for the last month, just holding the toy out, encouraging him, and when he bites it "Yes!" and let it go. I didn't add any tugging because I want to lets the meds do their work first. Which he's off of now and we have started to add tug to the game. At first it wasn't going so well, he'd only tug in his bed (his bed in the corner of the room is a "safe place" he goes there when he's stressed.). So I tied the toy to a leash and flopped it around, when he moved towards it out of his bed (he can't resist flirt pole-like things, so this was just to engage his interest in the toy) did a lot of outs and immediate "yes" after release but still moving it away a bit to keep him more engaged.
Then I had him sit stay in the hallway while I took the leash off, then said "Yes!" and when he got close "Wait", he stopped, but still wanted it, so I gave him the speak command and when he started to bark consecutively I marked and let him have it. He still took it back to his bed though, (which was normal before, but his body language is still uncomfortable) so I had him out, which he was reluctant to do (Woot! Woot!... and right now rules go out the window, it's easier to retrain behaviors, than to build a positive association after a negative/stressful one.)
He still wasn't coming out of his bed unless I coaxed him A LOT, so when I finally got him to tug, I said "out" and he started to head back, so I left the room. I called Tazzy with me and talked to Tazzy acted like I was playing with him. Pretty soon Dakota peeked around the corner I said "Yes!" and ran up and let him get it. I even got some growling on that tug before I marked again and let him go. I had him out (still reluctant :] ) and I went into the other room, called Buddy and played with him. Soon Dakota came in again and I repeated what I did earlier, he was really tugging this time and growling, shaking, sliding on the carpet. I marked him and let him go, this time after going back to his bed he got out of it and did a little loop/prance and went back. I got it back again and instead of going out of the room I went about 10 feet away and just went nuts with the toy, he watched me but didn't want to come out. So I thought of something a trainer told me, she taught an out by playing with the toy she had and making it totally crazy fun... so I acted like an idiot, tossing the toy up, making weeeeird sounds, I actually got so into it I was startled when Dakota snatched it up in a split second.
I praised him, got it back, and did that again he immediately came out and I marked him, we tugged a bit, when he really tossed him self into it I marked it and let him go. Then sat at the foot of the couch, he came out from his bed and walked around me, came up and rested his head in my chest (still holding the toy.) so I grabbed the toy and just pet him and praised him for not letting go. (before we started he wouldn't even hold it) He pulled back, I held, he shook, I let it go, and we ended it for the night. But awesome progress tonight!