I see this a lot with beginner students (although I am not a full fledged instructor, I do assist with the children's classes). Usually, it's a combination of "holy crap he's going to punch me", and "holy crap I'm going to look foolish". With that being said, could it be that maybe you lack confidence in yourself? You said you also freeze up when your dance instructor asks you to improvise-- and while I can certainly relate (because I have two left feet, don't ya know) that just shows that maybe you don't "believe in" yourself. I'm certainly not trying to call you out by the way. In fact, I think that you SHOULD feel confident in your abilities. YOU put in the time at the dojo, and YOU are the one who practices, so why wouldn't you feel great about yourself? Give yourself more credit, and don't be afraid of how you're going to look when you're sparring. ALSO, I do not know what kind of dojo you're enrolled in, but I would imagine that no one is out to knock your head off. Don't be foolish and don't forget your training, but also do not be afraid of your fellow karate kas.