Yes, it sounds like nerve damage. You'll need to have your surgeon take another look and assess whether anything further can be done. The danger with nerve damage is that the dog can't feel pain. If she's dragging that foot, the problem is that it will get injured and infected. Worst case is that she may lose the leg altogether.
Our 8 year old had TPLO surgery for a severed ACL and she made great strides in recovery within a week. The surgeon recommended water physical therapy, and we were able accomplish that in our own pool. Did your surgeon offer any physical therapy? Did he at least tell you what to expect as far as recovery is concerned? I really wouldn't wait to have that leg looked at. Nerve damage is bad enough, but if the circulation is also impaired, you've got even bigger problems.
It is very normal. Some dogs take up to a month to see an improvement. I used to work for a vet. I do think that your dog was a little old to put him through that kind of surgery. What kind of pain medicine did the vet put him on?