conversation courses have been my bread and butter for the last 7 years here in Germany and i would be very happy to help you develop some strategies...however, then you should take a look at my soon-to-be posted question about business english!
as for speaking english, your problems with hesitation are the same here in germany. a false word is the equivalent to being dubbed an idiot. this has been hard to counter, but i have made some good headway. first off, the thing i inform my students is that, not only are mistakes ok, they are mandatory for 2 reasons: 1 i need to know where their problems are and where i can tailor the course to help them learn and 2 everybody makes linguistic mistakes...even in their mother tongue! since language is a way to communicate and, by definition, communication has nothing to do with grammar, mistakes are ok. however, grammar is important to refine communication and that is why i am there. 'make the mistakes so that i can do my job and help you!' is what i usually end up saying. it works. it is also important for them to realize that if they don't make mistakes they would have no reason to come to me...perfect english doesn't require my teaching skills.
this is a method to help them understand that the mistakes they make are ok and essential to their learning. it is not easy to do, but in the long run, it is very helpful!
as to conversation, i usually begin with them writing for/telling me what it is that really interests them. everything from music and films to hobbies and dreams. these are then incorporated into my teaching material. i challenge the students to 'bore' me. i show interest and minimal competence in almost everything they wish to talk about and am willing to show my ignorance too. this is important to let the students 'teach the teacher' and feel important.
i steer clear of using english books based on several things. first off, it is hard to get american english books here and my british english is (out of respect for native british speakers) very limited. also, a book is usually not 'up-to-date' in it's language use and/or to generic. the only books that i have enjoyed using are either those with a continuous theme or just copied sections of the 100s that i have. otherwise i use the internet very hard and create worksheets on my own for specific topics(good conversation beginners!)
i use grammar as a scaffolding for language acquisition, focusing on one form and working it into the topic of the day. then i compare two related forms (present simple and continuous or simple past and present perfect etc.) and build from there.
if you have any questions, feel free to contact me!