RE: Confidence lost....
Kieth,
THe reason, I believe, that you're not steady is that you've lost muscle tone. The muscles used for bows aren't used for very many other things. Practicing will re-develop the muscles, and you should be able to hold steady in a relatively short time.
There are two different schools of thought regarding eyes open/closed, but I don't think there's a definitive answer - it seems that you should do whatever is best FOR YOU.
As far as seeing the arrow, the answer is pretty simple. You're looking at the target, but the arrow isn't hitting where you're looking - no wonder you can't see it. Once you start hitting where you're looking, the arrow will pretty much "appear" there. I shoot with an eye and a half open (like BobCo).
I would suggest strting as close as necessary to consistently hit the target where you're aiming. THEN back up. This will allow you to see the arrow, and the practice will develop the muscles so that you can move back.
In other words, PRACTICE, PRACTICE, PRACTICE. And please, in the interest of a quick, humane, and ethical kill, don't go into the woods until you are TRULY READY.