I'm with Tinstaafl, although I'm not sure that I would make it so complicated. Cover up all of the instruments and start by teaching him straight and level again. Often, the realization that their instrument fixation has held them up to the extent that they have not progressed beyond straight and level is a big enough jolt to get the ball rolling in the correct direction.
When you are happy that he can maintain the S&L attitude and return to it following a disturbance from S&L, then you can start to build up an appropriate scan starting with the altimeter. Uncover it for a second or so, enough time that he can register the altitude and assess any tend and then re-cover it. He should then apply an appropriate correction by reference to the horizon and hold it. Give it a few seconds for the performance to settle down and then let him see the altimeter again so that he can assess the effect of his contribution.
Once he seems to be doing this OK, then do the same with a climb and the ASI, and then a descent with VSI (or ASI if that's the way your school teaches descent performance). Then you can introduce turns in all of those attitudes. Take it slowly, don't move on until you are happy that he is scanning effectively between attitude and performance.
A couple of other points. One, the fact that his head is inside the aeroplane most of the time may not mean that he is using the AH. It is more likely that he is flying purely by reference to the performance instruments. This should be nipped in the bud, particularly if he hopes to go on to any type of instrument rating. Two, you should never feel that it would be a failure on your part to give up on a student. There are times when the student/instructor personalty mix just does not gel and if you feel that is the case, let somebody else go flying with him. It may be better for his progress and for your sanity. Cool idea, seeking help in this forum, though.