On an icy cold but sunlit Saturday morning in Apeldoorn, an hour's drive from Amsterdam, Victoria Pendleton looks pale and concentrated. A black beanie covers her head and, wearing glasses and carrying a backpack, she walks alone towards yet another curved velodrome where all her dreams and doubts will be laid bare again.

Early on the second day of the European championships, a week ago today, the greatest women's sprint cyclist of all time is a dozen metres behind her male counterparts in the British team. Sir Chris Hoy, leading the sprinters, is suffering from flu but he shows little of Pendleton's fragility. It is hard to know whether the 31-year-old Olympic and multiple world champion feels haunted or focused as she drifts past a camera crew. For once she does not stop to say hello or to reflect candidly on her mood. Pendleton's gaze is fixed instead on the corridor that leads like a dingy artery into the heart of the velodrome. There, encircled by the wooden track, Pendleton soon takes to the rollers. Slowly, she pumps her legs in the old warm-up routine that has eaten up so many hours of her life.

Twelve hours before, glowing from her impressive victory in the final of the team sprint with Jess Varnish, Pendleton had seemed different on these same rollers. Resting her hands on her hips as she warmed down, Pendleton smiled, opened her big eyes wide and told me how much she loved riding with Varnish. I laughed with her when she suggested that, in celebration of their European championship win, she and Varnish would indulge themselves by watching another episode of Downton Abbey back in their hotel room. It would be one way to switch off before the trials of Saturday and the individual sprint – which had once been Pendleton's domain but now presents her greatest psychological test.

The individual sprint is a brutal examination of will, self-belief and often domineering tactics designed to expose the weaker rider in a one-on-one battle. In contrast, the team sprint is a straightforward time trial. After years of uncertainty over who might partner her at next year's Olympics, Pendleton is thrilled to have settled on Varnish. Describing her own performance as "all right", Pendleton preferred to underline the 20-year-old Varnish's contribution.

"Jess has progressed massively. She's very mature and she astounds me every day I work with her. When I was her age I was a mess. But Jess has committed herself 100% to this role – which is to be the lead-out rider in our team. When someone is that focused and driven they're going to be a force to be reckoned with. I think the time we rode tonight would've made us world champions."

Pendleton has often seemed an isolated figure in the British team – which has traditionally been filled with men. And in the way that she has refused to abandon her self-confessed "girly" identity, with her love of sparkly shoes and glamorous clothes, Pendleton has been tough enough to stand apart. Over the past three years, often to the chagrin of her coaches, she has insisted on planning her own training programmes. Her image as a defiant but emotional maverick in an otherwise well-drilled British team has opened her up to criticism.

The week before we went to Holland, when I visited her at home in Wilmslow, Pendleton spoke about her own uncertainties and her more assertive critics. "Before younger girls like Jess arrived," Pendleton admitted, "I used to feel very lonely on the team. The boys would all pair up. That would leave me feeling unsure what time I was meant to meet them for breakfast. I'd be fretting – thinking: 'Did they say 7:30 or 8:30?' I'd come down at 7:35 and nobody was there so that meant it must be 8:30. I know I was being ridiculous because they would've banged on my door if I hadn't shown up. But it wasn't easy.

"The men couldn't understand how I could be so successful and so insecure at the same time – because it doesn't really exist in the same way in the male psyche. They were like: 'Just get on with it, Vic, what's all the faffing about? You've proved you can do it. What's the problem?' It was difficult for them to fathom how desperately upset I get when I fail and how negative I am about my performances."

Pendleton paused on that rainy night in Wilmslow. She thought hard and then, leaning forward on her sofa, said: "Maybe this is a better way to put it: I don't think they understand how I can be so open and vulnerable – and that I feel fine about exposing myself. Maybe guys also have insecurities but in a sporting arena they keep it to themselves. I can't do that. My vulnerability isn't always hidden on the inside. I don't think they admire it. I think they see it as weakness. In sport, so often, it's a weakness."

Does she still mind what people say about her? Pendleton looked briefly wounded, and then she nodded emphatically. "I really care what people think of me. Me feeling I have let people down is my biggest battle in life. I hate the idea of letting people down – and when I do I feel such a failure."

I have interviewed enough swaggering sporting personalities to linger over the difference in Pendleton. Doubt, like a drug, courses through her. It makes her more interesting and yet more troubled than any other gold-pursuing Olympian. Pendleton's stress, moreover, now comes in triplicate. Unlike Hoy, who won three golds at the 2008 Olympics, women could only race in the individual sprint in Beijing. Pendleton was at her crushing best, but her numbness in the immediate aftermath was intensified by her disappointment that she had not been able to race more at the Olympics. She became a campaigning voice behind the International Olympic Committee's subsequent decision to introduce parity and allow women to compete in their own team sprint and keirin events.

Pendleton now has three chances to win gold at London 2012. On her down days, she smiles ruefully, that means three possibilities of failure. More bluntly, as someone suggested in Apeldoorn: "Vic has to be careful of what she wished for. Three events could be too much for her …"

"I've always been quite sensitive," she said, before laughing at herself. "But it really matters that the people I love and respect don't feel disappointed by me. Satisfied is fine, disappointment is terrible."

Pendleton had been satisfied – the equivalent of elation in less complicated people – when she and Varnish won the team sprint. In the final they swept past Ukraine's Olena Tsos and Lyubov Shulika. But now, on a raw Saturday morning, the threat of "terrible disappointment" stalks Pendleton. She gives me a little wave in the velodrome. Her face, drawn and tense, tells a darker story.

The individual sprint begins with a time-trial that determines the seedings for the knockout rounds. Pendleton finishes fourth quickest and sails into the last 32 – where she easily beats Gabriele Jankute from Lithuania. But a superior Lithuanian rider, the redoubtable Simona Krupeckaite, looms next. Krupeckaite was good enough to become keirin world champion last year ahead of Pendleton.

Despite rising out of her saddle in an attempt to find more power, Pendleton cannot hold off Krupeckaite. She looks shattered – even though she could still remain in the competition if she wins one of two separate repechages for losing riders.

Defeat in the individual sprint provides a brutal spectacle. Apart from the nerve-shredding and over-the-shoulder-watching tactics between two riders trying to outwit or bully each other into submission, the losing cyclist warms down in the middle of the arena. And there is an almost unbearable poignancy in watching Pendleton warm down after her loss. Round and round she rides, her pain magnified by the fact that her circling takes her right past the press tables and some of her most stringent critics.

Pendleton's latest defeat follows two losses earlier this year to her real rival – the Australian Anna Meares, whom she trounced in the 2008 Olympic final. The fact that she has sacrificed competitive racing in 2011 for the sake of training designed to increase her power is no consolation. Pendleton is devastated.

Dave Brailsford and Shane Sutton, British cycling's chief coaches, watch closely when Pendleton and Varnish prepare to race each other, and the German Miriam Welte, in the first repechage. They occupy opposite ends of this golden era for British cycling – with Pendleton representative of the ground-breaking past and Varnish, alongside other young riders such as Laura Trott and Becky James, symbolising the future.

The champion is still too strong. She beats Varnish and Welte to reach the last eight through the back door.

More trouble lurks in the squat shape of Shulika, the mullet-haired Ukrainian. Pendleton defeated Shulika in the team sprint final but this seems different. Shulika's legs and rear ripple with power while Pendleton's physique is slender and graceful. Pendleton's menacing black visor comes down but her mouth, visible beneath the gleaming helmet, is much more feminine than Shulika's grimace.

Slowly, the tension ratcheting up with every lap of their cat-and-mouse prelude, Pendleton increases the pace of her ride. And then, half a lap before the final bell, the Olympic champion begins to race. Flying down the back straight, it seems as if Pendleton has a clear advantage but then, almost inexorably, the Ukrainian closes the gap. As they hurtle towards the finish line, Shulika edges past Pendleton to win by centimetres.

Pendleton slides off her bike and, knowing that she needs to win the next two races against Shulika, takes to the rollers. Looking like a trapped hamster on a wheel, she pedals and pedals and tries to convince herself that she can come back.

Her tactical coach, Jan van Eijden, cajoles and urges Pendleton not to allow Shulika a second chance. The British rider listens mutely, lost in her own world.

In the end, none of Van Eijeden's barked commands matter. Pendleton loses a decisive second race to Shulika.

Apeldoorn is a track that has caused her much grief this year for it was here, in March, that Pendleton lost her world championship to Meares. It is also a track that exerts a tortuous grip on her. Cycling here makes her feel as if she's sticking needles into her eye-sockets. Van Eijden, Sutton, Brailsford and, most crucially, Steve Peters, British cycling's team psychiatrist, all take turns to try to comfort the disconsolate Pendleton.

Three hours later, having briefly escaped to the hotel, she is back again at the velodrome and made to endure the indignity of a race to decide fifth to eighth places in the individual sprint. For the Olympic champion, who has won eight world titles, it feels humiliating. More seriously, even her qualification for the individual sprint at London 2012 remains unconfirmed. Early next year, Pendleton needs to find her best form in a World Cup event at the new London velodrome and then at the world championships in Melbourne to seal her right to defend her Olympic title. And so, in Apeldoorn, it seems inevitable that she finishes last in the losers's race. Her official place in these European championships is eighth.

She may be vulnerable but Pendleton is also intensely proud. On the frame of her bike, the words Queen Vic have been stencilled in as a wry reminder of her enduring prowess and regal reputation.

It will take great courage for Pendleton to ride again in the keirin on the last day in Apeldoorn. Victory in the most unpredictable of all sprint races would transform her mood and allow her to leave the Netherlands clutching two golds won against all the odds and the disadvantages of her current training programme which is geared to her peaking perfectly, one last time, at London 2012. Yet, as she zips up her top and hides her head in a hood, Queen Vic does not look as if she has glorious redemption in mind. Instead, her eyes glazed with tears, she leaves the arena on her own, silent and vanquished, looking like a great champion fighter, or even a monarch, stripped of her title.

Pendleton has shown me before that, on the inside of her wrist, the opening line to a Smashing Pumpkins song has been tattooed into her pale flesh: "Today is the greatest day I've ever known." She gave herself the tattoo, preceded by a girly facial, on the day she turned 30, in September 2010. Pendleton often jokes that, because she is tormented by her past and fearful of the future, she tries to live in the now. She knows that, in this same Smashing Pumpkins song, a different set of words run: "Can't live for tomorrow/Tomorrow's much too long/I'll burn my eyes out/I'll tear my heart out …"

But now, disappearing into the cold and black night, tomorrow is all she can cling to in this moment of distress. Tomorrow may be different. Tomorrow, perhaps, Queen Vic will rise again.

Read part two of Donald McRae's special report with Victoria Pendleton