I'm not an expert in this area specifically, but I've been trained as a flight instructor with students having to overcome fear of failure or accident. I've had students that were absolutely terrified, to the point of crying, and I've helped them through it to their success.
I found this to be a good podcast: http://www.peaksports.com/sports_psychology_blog/?p=1336 My answer is based on personal experience and material from this podcast.
After an injury (or witnessing one, in your case) overcoming fear of re-injury is a big hurdle. When you play with this fear, you will play tentatively, you will hesitate, and you will play tight, perhaps even increasing likelihood of injury. The worry about the particular previous injury causes you to focus on all the wrong things, and opens you up to other injuries and poor performance than if you removed the concern.
The longer you spend away from your sport, rebuilding confidence is also a huge factor. Confidence is hard to maintain even without the reminder of injury. You have to somehow get rid of the anxiety.
To break out of this cycle of thinking, you need to find a way to refocus your attention when you play. Be competitive, get in the game. Think about the play developing, running hard, beating your defender. You might need to redevelop this focus in practice before returning to a competitive game. (For example, a few weeks ago, I started practicing some plyometric jumps outside of my sport, and the next time I went to play, I just jumped instinctively for a block I wouldn't have gone for before... the reaction from my training just took over.)
I think you may surprise yourself at how easily your competitive spirit can take over once you start playing and help you forget all about the injury.