I agree that prong collars are not for the long-haired or sensitive personality. For the prong collar to work correctly, you would probably have to shave his mane off. I don't believe in prong collars for any dog, really. And this is no offense to you, but I believe it's used way too often by dog owners that are "lazy" don't want to take the time to correct the problem by using positive reinforcement. A smart dog like a sheltie will quickly realize they only have to listen when the collar is on. I compare these collars to shock collars for barking...they sometimes overcorrect, and they are just a "quick fix" that don't get to the root of the problem. Not to mention that once you correct your sheltie with the prong collar, it will not fully release with all that fur (even more so when you have a 2.5-3 year old with the full adult coat) so your dog will be having his fur pulled out constantly. (Compare it to having a piece of tape stuck in your own hair and then someone trying to pull it out very slowly...ouch).
Nylon collars will often cause breakage and matting in the fur, so that's another no-no for shelties and other longhaired breeds. I just groomed my friend's Pomeranian and had to cut a good deal of mats from around his neck due to the nylon collar she uses on him causing thick uncomfortable mats.
Martingales are not generally used for training purposes. They were developed originally for dogs such as the greyhound, whose necks are bigger than their heads and can easily slip out of their collars. They have become popular for shelties because some shelites have a reputation for slipping their collars when they startle during a walk. They are designed to tighten only to the point of being snug around the neck. It should be impossible to "choke" with a martingale.
Chain slip collars (as I tried using once) can pinch the skin/fur-as I found out from my dog when I tried correcting him with it-it pinched his fur when I pulled the chain and he gave me a quick "yip", I could tell it pinched his skin/fur. However, they should never cause trachea damage if you are using them properly. The only time a choke chain would cause trachea damage is if you tie your dog out with it and is left to lunge at whatever, or if your dog gets a running start and is stopped abruptly by the chain.
When you say that your sheltie seemed "relieved" with the prong collar, you also state he wanted to be pet, and be given attention. I'm wondering if this reaction was because he was maybe a bit nervous with it on, feeling "teeth" around his neck.
I myself have 2 puppies. 30 weeks old , and 20 weeks. Both shelties. My 20 week old I brought home at 8 weeks. He has the most PIERCING bark I have ever heard. He barked and barked and barked in his crate. He could bark all day and night-he doesn't care. I think he enjoys hearing himself bark. Now, due to my training, he barks in his crate ONLY when he absolutely has to go potty. I acheived this by abandoning the "ignore" method that worked for his older playmate, and approaching from a different angle with him. I grabbed my spray bottle that I use on the cats, and had that at the ready. I stood outside the room his crate was in, waiting for him to bark. He barked once, and I said "QUIET". He barked again, and I misted him once. He got the idea that very day. I've had to give him very few reminders over the course of the past few months. He is quiet as a whisper in his crate now. So I would recommend the spray bottle method as there are some dogs that don't mind barking for hours on end. However, I now am working on controlling barking while we are out on walks...he barks at anyone he deems suspicious, or any cardboard box that could be a threat. He does not bark and everyone or every box, etc, only certain ones. I have tried using a sideways jerk correction, but this does not work. Instead, I grab the leash close to his collar and I instantly have his attention-he looks straight at me, and I say "QUIET" and it's done, we can continue walking past whatever and we're fine.
As far as a training collar for him, you really shouldn't have to use a "training collar" on him. I would recommend a rolled leather collar ( as they prevent matting or breakage of the fur). And use positive reinforcement. If you catch him doing an unwanted behavior, use your "no" word. (I use a sharp EH-EH) and either spray, or shake a can of coins, etc. That's as negative as it should get. Wherever possible, keep things positive. ALWAYS reward behaviors that you want to see, and "mark" the behavior with a word and treat. I use rolled leather collars for mine and they work fine. This is what I would recommend. I'm not an expert, but these methods have worked well for me. I have established myself as the MOST VALUABLE thing to my dogs. I'm more valuable than the kids next door dropping pieces of pizza their eating on the porch, because they know that by coming to me, they will receive a high value reward. As I've said to other owners, make your grass greener, no matter where you are, you have to have more value than anything else. Good luck!