I have been thinking about this topic quite a bit over the last few days.
How do you overcome the fear of anything?
FEAR is merely an acrostix for False Evidence Appearing Real
Fear also keeps you alive - a certain amount is a good thing.
There is a good book called "Feel the Fear and Do It Anyway" which is worth a read. Sheer exposure to whatever it is you are fearful of can eventually be the path to enlightenment.
My experience is that when a student is fearful of a manoeuvre this is often because there has been some event in the past which has put him off or maybe he has been listening to some "bar - talk" so I would probe as to why it is that he is fearful. Fear can tranmit light light waves so if the instructor is not 100% at ease the student will pick this up.
I certainly agree that aerobatics are a good way to breed confidence. My father, who was a veteran instructor of many years, often got students doing loops before they went solo!