it sounds like you're doing a great job to me.
I think that the use of time outs depends on how you use it. We use it occasionally and sometimes it's good because it gives everyone a chance to cool down.
I mainly use it after he has done something to his brother that has hurt him after being asked not to. He has to sit down in a chair immediatly while Imran gets fussed over and cuddled. I think that withdrawing attention from him for those few minutes demonstrates that he doesn't gain anyhing by hitting/kicking/biting/pushing his brother.
I usually use the timer on my phone and once the 3 minutes is up he has to say sorry to Imran and give him a cuddle and then we get on with the day and we don't refer to it again.
Imran has recently taken to attacking Yasin when he gets angry with him so I suppose we have to introduce it for him too. I don't know how I'm going to get him to sit down for a minute.
We don't have to use it often and I usually prefer methods that are more consequence based ie throw the car, lose the car but Yasin has already learnt that being mean to Imran has consequences that he doesn't like and that after you hurt someone you need to kiss them and say sorry.
I don't think that time-outs used in moderation by a loving parent as part of a tool-box of methods will cause lasting emotional damage.
I think it's important to remember that the full term is 'time-out from positive attention'. As originally concieved as a discipline method it assumed that the parent was loving and engaged and that it's not a punishment so much as a consequence. I think that used in a way like you described where a parent becomes cold for an extended period of time it could be quite traumatic.
We give one minute for each year and we use the timer on the phone - once time's up then it's forgotten. I think it's important not to hold grudges and to have a cuddle afterwards to show that everything is ok and we can move forwards.