I have never heard of lunging with a chain over the horse’s nose. The few times I’ve used a chain I run it under his chin. To get a proper head set I occasionally use a surcingle to attach reins to. My main problem with one of my horses is that he stops and turns toward me (and stands). He is VERY lazy. It definitely sounds like your horse is sore – could be his back, his stifles, his hocks, etc. Have a vet experienced in lameness (the horse doesn’t need to be limping to be in pain) or a good chiropractor check him out.