Heather,
I wouldn't go so far as to say that this problem can be "fixed". Yes, you can make improvement, you can train her to respond better to you under the conditions that stress her, and you can gain more control, BUT you should always be vigilant and never put her in a situation where you have no control, or that you cannot handle her in. She will probably never be "OK" with kids. What you are doing is not fixing her problem with kids, but rather, showing her that you are in control, and that she has to obey even when she's in a situation that makes her uncomfortable. More importantly, that she can relieve her stress by focusing on you.

At any rate, try the attention excercises until you feel like you've got a good handle on it in a distraction-free environment. Then move to an area where there are other things around that might get her attention, but aren't stressful for her. Don't start working on the kid thing until you have a good sense of being able to read her; i.e. how you can change her focus when she is stressed, and how to tell when she is too stressed to respond to you and what to do when that happens.

Sometimes, as suggested, it does help to have a trainer's assistance. You're correct that anyone can call themselves a trainer, but I think, unless you live way out in the boonies, you should be able to find someone that works with this type of situation, in the way that I have described.

Remember to start small and take your time.

The dog was off lead (and off e-collar)because he had perfect obedience and had not shown any agression to a dog in over 3 months of working and playing around dogs. PLUS he was with his trainer who he lived to please (me).
Sorry to butt in here, but I have something to say.

Your problem is I think in a basic misunderstanding of dogs. Aggression is a behavior that is brought under control by training, and a strong leader, all of which you were able to do with consistent training. Aggression does not dissappear by training, but is rather controlled. If you thought that the dog no longer was capable of being aggressive, nd so removed the e collar and thus your ability to correct him, that is where you made your mistake. I can bet, and you can correct me if I am wrong, that day wasn't the first time you removed the e collar. There may have been a few other instances where you did not have it on, and had to repeat your commands twice, or maybe even thrice. So slowly the dog learned that you really weren't in control, unless he was wearing the collar.
Put the dog in a position where the dog feels the need to demonstrate that aggressive behavior, in the absence of the leader (or what the dog perceives to be), the dog will, and I really doubt this was the very first time the dog ignored you with out the e collar on, for smart dogs, it takes only once, believe me. So, as you did not have the e collar on the dog, you were unable to correct him for his behavior, the first time and thus your problem with the e collar magically appears. I don't understand the concept of leaving off the e collar or prong collar (ever for aggressive dogs) as a reward for being obedient. The collars them selves are not punishments, but rather tools for you to help stay in control. A reward for 3 months good behavior should be love and praise, not relinquishing your leadership role by giving away your teeth.

Michelle

hi heather and all
a little late to post a response - but here goes - of all the posts i think one thing is being left out - unless i missed it - is this dog being left out in a yard uncontrolled to "fence chase" - this can be a rewarding and reinforcing experience - kids running by screaming, on bikes, or even walking by eyeing the barking dog very cautiously, or worse yet antagonizing her. you can train - correct etc up the wazoo - but if this is happening it is undoing all you are trying to fix - and reinforcing her sense of territoriality - her reactions seem to be worse in contained areas - house, car, yard, - i would work with her in these specific areas and possibly work outside the areas (car,yard) with her inside and SAFELY contained, have a child with me and approach with the child and reinforce her with food - she should be crated while riding in the car, or one approach i used was a prong, leash attached, run pulley style under the back seat belt - i sat parked, dog carries on - i'd give "down" command, give a pop on the leash and force the dog into a down, when down and quiet reward - then work on the handler approaching the car with what causes the dog to get aggitated and reinforce any calm behavior - aside from all this i think heather should look up a reputable trainer in the area and have them evaluate the dog and situation in person considering how dangerous the whole situation can become, before doing anything else - obedience is fine on an e-collar but in the hands of someone inexperienced it can really mess things up - so can ill timed or poorly delivered leash corrections - i have seen people actually rev their dogs up with nagging corrections or restraint on the lead.
jmho

oops
just spotted lou's response - oh well, so much for my speed reading through the posts - he adressed the fence chasing issue etc. perfectly