Are you using a blow dryer for humans or one for pets? The human ones can get too hot and burn your pup. I use this one:
Amazon.com: Andis 60070 Comfort Dry Ionic/Ceramic...
I find it very understandable the a dog would find a blow dryer to be scary. You are waving this VERY noisy thing at them that has lots of wind coming out of it! I get my dogs used to it gradually. They are around me when I blow dry my own hair, and from several feet away I also point it at them and talk to them and tell them how pretty they are. From the distance, it doesn't blow their hair much, but they get the idea and they aren't afraid of it.
My previous Yorkie, the late great Loosie, would come running every time she heard the blow dryer. She would stand right next to my feet and wait for her turn. I guess she figured that when it was on, that was what she was supposed to do. She was eager to please me to the extreme, I miss that girl.