I don't see a problem with your therapy at all. I've actually read about the whole developing new neural pathways theory, and also about how touch releases oxytocin. I think it's possible combining safe touch with processing bad memories could re-write them to be a little less bad over time.

My only concern with your therapist was the inconsistency. It bothered me she allowed the hand holding, then took it away, then allowed it again. It probably was just her figuring it out, but I felt for you because I would have been upset by that.

My therapist doesn't hold my hand, but I've never requested that either. We do hug, and I think it's been beneficial for me. A couple times he's let me cry on his shoulder when I was feeling very upset, it was really comforting for me. I would say I wanted him to hold my hand even if I wasn't so self-conscious about my hands and in general.