Patrick,
The cable went out last night. Of course it waited until I had typed a long, detailed recomendation for this dog, which didn't post!
So here we go again!
As I said before, based on the description it sounds like this is more fear based rather than a dominance/rank issue. The challanges described are all either in reaction to something the dog doesn't understand (corrections, prong) or to people he feels he has more power than. I wouldn't use a prong on this dog. It sounds like the dog is too soft for it. It also sounds like the owner is inexperienced and there is a good chance that there is probably some over correction going on. The other thing that may have happened is the collar may have been put on wrong (slipped over the head, rather than split and put around the neck). If you insist on using a prong the dog must think the prong is the best thing going. Bring the collar out and hold it in one hand and treat with the other. Use the prong to pet the dog and treat. put the collar on and treat the dog while it is wearing the prong, no corrections. Once the dog feels like the prong is the best thing ever, then start with light corrections.
With this dog I would most likely use a slip collar rather than a prong. If the dogs temperament is really soft it may take a flat collar to start. With the slip it can be left on as long as there is no chance of the collar hanging up on something, like a chain link fence or a run. Once the dog is used to wearing the collar and kind of forgets about it you can start to use it for corrections. Start light, after the dog understands the required behavior.
Training should be the very best time of the day for a dog. Lavish praise, maybe some treats for good behavior or a proper response, anything to make it a fun time. The dog should be very happy anytime you pick up a leash.
If the dog continues to go for the handler with corrections, put 2 slip/flat collars on the dog. One goes to the handler and the second to a second handler. You cannot attach the second one to a fixed object as you then can't use it to make corrections. The second handler is to keep the dog off the handler and correct for handler aggression. The primary handler wil also keep the dog off the second handler. Do normal obedience and the second handler needs to be as passive as possible. Just stay in position to make any necessary corrections. At this point I have the dogs owner be the primary handler rather than someone else.
The other thing I would do with this owner is teach the basic dog handling skills with out the dog. How to make a proper correction, when to make a correction, proper foot work, how to concentrate on the dog while working. The method I use for this is to teach the foot work and have them practice it until it is second nature. Then teach the handler how to make a quick correction, The handler needs to understand that the most important portion of the correction is the release, not the tightening of the collar. The goal with a slip collar is not to choke the dog but to get their attention, provide feed back, and to break the current "train of thought" to refocus the dog on the training. Once the handler understands these things they take "Bad Dog Richard" out for a training session. I put a slip on my wrist and do all the things that a dog will do wrong. If the handler doesn't correct me, I correct them with the leash. Once this is down then we start with the dog. I know this sounds like a long process, but it usually really isn't. Usually we can get to training the dog in a couple of sessions with out the dog.
This dog will probably require very light corrections to start with until it learns why the corrections come. This is a dog that will need lots of support to get over this. The aggression towards children is of some concern. I would be curious as to how and why that started. It could be that the dog has had bad experiences with children. It may be that the children need to be taught to play properly with a puppy. Often children will create this type of situation unintentionally. What seems like a good game can turn out to be a problem, and once it is started it can be difficult to stop. With this dog it may be a good idea for children to become treat machines for a while to make a positive association with children. Once the dog is happy to be around the children have the children start to play games where the kids stay stationary and throw a ball for the dog to go get. No chasing games towards the children or the kids running from the dog. After the dog loves to train, start having the children do some obedience work with the dog. This will become another positive association for the dog.
If you can't be a Good Example,then You'll just have to Serve as a Horrible Warning. Catherine Aird.