This is really odd as I've never come across such fear and dislike of dogs in my life. Every single person I know is a dog person, every child I know personally loves dogs (and cats, and horses, and rabbits, and chickens, and …..
That's not it at all
I like dogs, my children enjoy visiting dogs who are used to having children in their house
However, dogs who don't have "their own" children at home are unpredictable around children, so they are approached with more caution, thats just sensible and anyone who is properly into dogs, and understands them, would agree.
I would be DOUBLY cautious of having my children around a dog whose owner is like the OP who doesn't see their dog as a dog: i.e. capable of unpredictable behaviour if suddenly surrounded by small children when the dog isn't used to that.
Combining all of the above, I would not want my kids in a house with the OPs dog. Other dogs, yes. it's all about the owners, not the species of animal in general.
My kids visit friends who have kids AND dogs and are sensible dog owners.