Wondering if anyone has any ideas for helping my dog get over a traumatic experience?

She is 14 years old, has always been active, loves going for walks, enjoys playing wresting and chasing games with other dogs (and cats, given the opportunity), sucks up attention from humans, has always been a bit distrustful of children but otherwise very people- and animal-friendly.

About a month and a half ago, she was attacked by two larger dogs while just as we were entering the local park where I usually take her for walks. She was slightly hurt; one tooth-puncture which healed quickly and a limp which only lasted a day or so. But she was quite frightened. She now refuses to have anything to do with other dogs or people she doesn't know, which is bad enough. Worse, she is frightened of walks. She still gets excited when I pull out the leash, but actually going anywhere is an exercise in frustration. Sometimes, it's nearly impossible to even coax her out of my yard. Much of the time, she refuses to go more than half a block or so from my house. When I do get her to go anywhere, she is constantly stopping and looking around and looking behind her to make sure no ones coming after her. I've tried altering our normal routes, which helped a little at first, but didn't last. Then I tried constantly coaxing her to keep going whenever she stopped, which I can eventually get her moving again, but she's obviously on edge the entire time, and as the weeks go by she's getting less and less willing to go any distance from the house. The last week or so, I've been letting her decide when to go back and turning around when she stops and won't go further. I don't really think that's the right thing to do; I think it just tells her that I'm not really in control when she needs to feel I am, but I am at a loss as to what else to try.

I hate that she's lost something that she enjoys; both going for walks, and playing with other dogs. Besides which, I don't know how else I will get her any exercise if I can't walk her! True, she is an old dog and has slowed down a lot, but I am sure she still needs regular exercise. She never would really play fetch, she gave up chasing squirrels a year or two ago, and I don't think the occasional game of tug-of-war is really enough exercise.

Any ideas? Do you think I'm better off pushing her to take normal-length walks, or letting her turn around and come home when she wants? Other thoughts?