Hi Brian,
I dont know about any mods concerning this issue, unfortunately, but does it really affect the dog when they are afraid of something? Like my Sim dogs seem to be afraid of pretty much eveything: the dishwasher, the television, radios etc. They always walk up to it and start to whimper and looking all scared. I do feel bad seeing that, but it doesnt seem like it affects them much further. Neither of my dogs had like an easily scared trait but yet they always seem to be scared of something.
I havent checked that myself yet, but maybe there is a training option to make them a little more fearless in general?