Its very easy with a dog as nervous as rusty to believe he has been beaten and neglected prior to you getting him. It is just as possible that he has just had no experience of things, so he sees everything as a hazard. He was probably a farm bred collie, so didn't see much of life in his early days, he may have then gone to an owner that didn't get him out and about seeing things.
Unfortunately a dog of 18 months needs to experience the same thing again and again to gain confidence of it.
If you have a garden, I suggest you take your dog and grandson out there so rusty does not feel trapped. Get your grandson to throw high quality food that rusty likes away from him and let rusty run to get it. This must always be done under your supervision, a dog as scared as rusty, may bite.
Try to get him playing, chasing a ball, tugging. if you can get him to grab a toy, let him win all the time to build his confidence.
It will be a long slow progress, he will never be a lion, but I have seen many dogs like rusty, gain a good quality of life.
Contact a behaviourist in your area to help with confidence building, if they suggest classes, look for outdoor ones, not one in a hall, he will probably freak.