I agree newnanny...i think that keeping the dogs completely away from the little girl is counter productive as it will likely feed into her anxiety as it reinforces that there is a reason to be afraid. Many of the gransnetters on this threat talk about their life long fear of dogs and im sure that some (not all I'm sure) were themselves kept away from dogs, meaning that they were not given the opportunity to change their mindset, hence the lifelong fear! Unfortunately fears can escalate into phobias which without attention can get bigger and becomes a very unpleasant, confidence sapping, anxiety producing state of being that just isnt cool. I have personally overcome a phobia of flying (almost) which is not the worst as it just stops me having lovely holidays but it does give me a glimpse into the crippling fear that can literally send me into awful blind panic. As a wise gn posted dogs are EVERYWHERE so I do think that rather than risking fear at every street corner a gentle, systematic introduction to the dogs might be a good thing. I wonder whether walking the dogs together would be sensible first step. Your gd seems to be screaming when there is a chance of being confronted face to face with the dogs so keeping them initially at a distance and on a lead whilst on a walk might be a good starting point gradually getting closer to her and just walking naturally at her side without particularly drawing her attention to the fact that shes close to them and its all ok. Once she's happy to go for a walk with them then you could possibly pass the lead to her (maybe a long retractable lead would be best as you can shortern it over time. Ultimately, the aim is for your gd to be in control and more importantly to FEEL in control. Anyway Moo moo you understand how desensitization works and know your dogs and gd so can decide what will work best for you. What I would suggest though is that you enlist the support of your daughter so that you are singing from the same songsheet.
Incidentally, as a child i was bitten by a boxer (not the human sort) while on holiday in Austria and did for a time feel afraid of dogs, but as a farming kid surrounded by dogs and ever changing animals of all sorts i just had to get on with it. It does perhaps explain my fear of flying to 'dangerous' foreign countries though (wink).
Good luck Moo..dogs are not for everyone, and that's fine too, but a companeable relationship with a dog can be wonderfully enriching so i think its right to persevere, albeit at a gentle pace that doesnt cause her additional distress.