Don't Nag Him!
It's extremely important that you give your horse that "release" from any scary activity by rewarding him each time with a pet and giving him a chance to relax for a moment before you begin to work again.
After your horse has learned to stand quietly and just look at you while you yell "Boo!," wave your arms and jump about, praise him, and quit doing it. You don't want to aggravate him, so when he's gotten the idea, it's time to move on to the next level.
Mild to Wild
At this point, you can repeat the process with your collection of scary objects. Start with a washcloth. Go through the exact same procedure you did with the "Boo." Begin by gently waving the washcloth. If your horse responds correctly, put it on the ground before you go up and praise him. Then go back and shake the washcloth. Reward him for his correct response. Eventually wave the cloth wildly over your head while performing ridiculous dances from your youth.
Following the pattern of mild to wild, progress to a towel, then perhaps a lariat, a plastic bag, a bottle of rocks, and a tarp as your horse learns that none of this is actually going to hurt him. You don't want to actually touch him with any objects at this point, but the more situations you can expose him to, the better.
Keep in mind that every new object, every new action with that object, and every new distance is scary for your horse, so reward him every time he just looks and doesn't move his feet.
You want your horse to learn to face whatever scares him, so now you can move a bit to the side, "kiss" to him, and encourage him to turn to look at you. Repeat these exercises at different places in the round pen so he learns that there's not just one magic piece of real estate on which he's to stand and look at scary things.
After your horse starts to understand the "spook in place" concept, change tactics slightly if he moves off during your activities. If he spooks, continue the exercise, but keep even with his nose as he circles the pen until he turns and looks at you or faces you.
Don't scare your horse to the point where you lose control; just keep him a bit uncomfortable as long as he's running. And keep your position at his nose rather than chasing him from behind. When he turns toward you or even looks at you with one eye, stop your action. When he stops and looks at you, reward him.
Have Fun!
This training technique can become a fun game for both you and your horse. It's also a game at which both of you win and which ultimately makes both of you a lot safer. Have fun!
