My son is just shy of his 3rd birthday.  Six months ago, while in day care, he was assaulted by one of his teachers - she smacked him in the face several times and also bit him on the nose.

Since then, he has shown some clear signs of trauma (fear of teachers, increased aggression, and an increased tendency to bite other children).  We sought out a professional opinion and the recommendation was to not remove him from day care as that could simply add to the trauma.  Over the last few months, his behavior at home has improved tremendously and his behavior at day care has also gotten better somewhat, but he still bites at the first sign of frustration, refuses to share, refuses to participate in group activities for the most part, and absolutely refuses potty training (the assault occurred during a bathroom visit so I am sure that's the reason for that).  We are concerned that his social skills have suffered - we don't live in an area with many children and he is often not invited to participate in off-site play groups with his classmates, I suspect because of the biting.

The question is, what can we do to discipline him without setting off the issues he has from the assault?  We don't spank him nor do we raise our voices to him when addressing trouble issues because it only seems to make things worse and we've had better results without doing so, but it's reaching the point where our frustration is at it's breaking point.  The therapist thinks he is very intelligent and is perhaps bored at day care.  My wife thinks we've overindulged him since the incident and so he thinks he can get away with whatever he wants.  I don't want him to be labeled as a problem child among his peers or his teachers.  Any suggestions?