This is a lot to reply to with some wonderful information and guidance.
I think @selzer
answered your question. Nothing to add.
What was your or your wife's plan for him? Sport? Protection? Pet? That will determine your decision about what to do.
I will agree with you! She just wants a loving caring companion!
He's been with the breeder a little long. A little too long. But I have done this and most other breeders have too. A dog will be ok, even if it has been with the breeder for the entire socialization period -- usually 3-16 weeks of age, but it can take a little longer for the puppy to acclimate to their new situation. And, it could mean lasting lack of confidence, more work on your end, and limit the potential of your dog.
When dogs go home too young or as older puppies, new owners have to stand in the gap and try to fill a role that was not filled at the natural time, by the proper players. A too young puppy owner, needs to teach the puppy how to act around other dogs, and how to bite less hard, which the dam and littermates normally teach. A puppy that goes home older can be fine. Or it will need careful socialization for an extended period of time, as well as exercises to build confidence in itself and in its new owners. Normally a puppy goes home in the middle of a period where good experiences help the puppy with similar experiences pretty much for life. And negative experiences can also be drawn upon for an extended period, maybe not for life, but maybe. Prior to going home, the puppy experiences little outside the nest where his mother and sibling provide all the confidence he needs. But the removal of the puppy from the nest and putting him into a new environment at this point generally provides a huge boost of self-confidence. The puppy is pitched into the deep end, so to speak, and he must sink or swim. If he learns to swim, then he comes away with a real boost that dogs that remain in the nest up through the socialization period and beyond do not get.
The new owner then has 8 more weeks of opportunities to provide positive experiences. If the owner does this with some wisdom (not flooding, maybe a person, place, or thing per day, and maybe a person, place, or thing every couple of days), then the puppy will most likely be well adjusted. And regular obedience classes where dogs are managed on lead by their owners, will provide a great opportunity to make a dog easy to take with you in most situations.
The way I see it, you have a couple of choices. You can keep the puppy and work with him, building his confidence in you and in himself, and carefully providing positive experiences throughout his maturation process -- until 2-3 years. Not a lot. Once or twice a week. The trick is to expose without over-whelming the dog. When the dog displays skittishness, ignore it completely. Without any fuss or fan fare walk over to the object that cause the disturbance and calmly say something like, "oops, the plant fell." Pick it up and move on. If you laugh at this behavior, or if you try to correct it in anyway, it will probably take longer and become set. It is kind of like submissive urination or excited urination. Dog is nervous and piddles -- puppy urine has pheramones that will calm an adult dog. If we just ignore it and clean it up, incidents will become fewer and farther between until they disappear as the dog learns to trust us. Excited urination requires a little different. Again we ignore and clean it up, but we make a conscious effort to keep comings and goings low-key, and maybe meetings and greetings outside. If we do not heighten the stress of these by acting frustrated or correcting, they go away on their own.
Some dog's will be skittish for a while and become less so. Some will be skittish forever.
The other choice is to return the puppy and find a breeder who you have confidence in, possibly wait on a waiting list, and take the puppy home at the proper time.
Lots of adult dogs are homed every day and make it with their new owners. Lots of puppies your dog's age are rehomed because of behavior or temperament issues that other people manage without too much difficulty. A dog is not ruined by not being homed at the proper time, or by being re-homed. Sometimes it just takes some understanding of what the dog might have missed and what he might require. If you can look at the entire picture, honestly, then you can make your decision as to whether you can provide what the dog needs, or not. If not, sooner is better than later.
I agree that he was with his breeder a little long, but it did not take him to horrible long to become comfortable with us, I love animals in general, but from day one we loved on him and played with him.
I try to take him with me to as many places as I can, and socialize him, my parents renovate houses on the side, and I work for them after my day job, I normally bring him with me once or twice a week to just be around people, hes got plenty of room to run around and play, my parents have a 4 year old yorkie that he plays with (the yorkie sometimes hides from him because he doesnt want to play) normally not to many people are in and out of the home we're doing so I want say theirs to much going on, he normally does fine, of course when I first started bringing him he was scared. We live in a very quite subdivision with just a few people living in it, and we are kind of isolated to ourselves with a 2ish mile walking trail behind our house in the woods that leads to a creek, and he could walk it and explore for days, he never goes more then 10 feet away from me. My wife leaves for work at 7, gets home at 12:30, I leave at 8:30 and get home at 5:30, so hes not alone for a horrible amount of time I would say, we normally take him for multiple walks down through the subdivision granted no one lives in the part we walk, and normally 1 long walk on the weekends.
Over eager grooming can cause a skin irritation that could turn to a sore and scar. Like a hot spot.
It is not terribly uncommon for dams to injure pups. Especially first time moms.
I want to say with confidence it was a first time mom.
Puppy could be in a fear period. Try to be patient with him.
If you choose to try to socialize him, please make sure you introduce things below his threshold where he reacts. You want him to feel at ease around something.
For example, you can try to VERY quietly play fireworks/cars/new noises on youtube or etc while feeding him, and gradually go from there. Just one example.
Have a quiet park nearby, or is your street quiet? Go outside and give him extra delicious food as he observes, or his favorite toy. Play with him.
Do obedience and trick training using positive reinforcement to begin, it will help boost his confidence.
He normally sleeps in my truck while im driving, and I hit the windshield wiper and he didnt know what was happening, and I believe I answered your question above.
Clearly mom licking him did not accidentally cause a scar...
First lie, HUGE red flag - for the breeder you dealt with, not the dog!
Second lie, "Nobody wants an all black shepard"... BS many of us prefer them. So much so in fact, that there are breeders who specialize in producing all-black Shepards - which you should also avoid like the plague, for a whole host of reasons I won't go into here now, but if this interests you search these forums for past posts on that topic.
Back on track, I totally agree with what @Nigel
said above! I would add though, that so often people jump to the conclusion that a dog has been abused as an explanation for their skittishness...don't fall into that trap. He may or may not have been, but in either case you don't gain anything, nor does he, by you feeling sorry for him. Be calm, be firm, and be fair. Whether he was abused or not he'll respond well if you're consistent with that...calm, firm, and fair.
And loving and animated and fun too, but above all, gain and maintain his trust, and you'll be fine!
The ear thing is more difficult. Search this forum for nasal strips for some innovative ideas....but honestly, my own position on that is let them be what they're supposed to be...
All the best!
I have never seen a black German Shepherd before in my life, and I think he has a beautiful color to him, both parents had more or less your typical colors, and I honestly think ill just leave his ear alone and not worry about it.