
I would talk to a behaviourist - without seeing her in action, so to speak, it's not a good idea for anyone here to give you advice on this IMO. I will, though, give you a brief ramble about my own experience with a dog like this, though it's limited. Just to give you an idea. I've just started walking my brother's dog, and she is exactly as you have described - and over the last couple of days I've been watching to see what my actions did:
The first encounter - a staffy, up the town. Tia was on the opposite side of me, I kept walking and told the other dog to back off (it was off leash and wandering ofer to say hi), the owner called it, and not a peep from Tia; she did stiffen up though, but was (luckily) distracted by the exciting environment.
Second - a collie, on a footbridge over a railway. We had nowhere to go and no space between us and the owner and the collie, she started to growl and bark a bit as we got closer, and tried to leap at the dog - I had to pin her against the wall of the bridge to control her, and as soon as I did that she went crazy. and I mean crazy! screaming, thrashing around and trying to slip her collar (I have her on a harness just in case). The collie, btw, didn't react at all!
third - this morning, at a little nature park. tia was on flexi, unlocked, and a little dog came running down the hill to us - she ran straight back past me and up to it before I could lock the flexi. But she didn't get nasty - she actually started playing with it, so I got a bit of praise and some liver in sharpish!
fourth - another collie, up the local playing park. It was quite a way away, and Tia was only bouncing a bit and woofing, she was on fulle extension on the flexi, but the instant I locked it and tried to guide her the way we were walking she atrted to leap around and growl, hackles up.
These are only three encounters, but they tell me that if she has room to move around she's fine; if I don't react (except to praise) she's fine, as she can't see anything to be worried about (and defend against). From the past, I know she always goes nuts if we are walking down a particular 10-minute walk which my brother always takes her on, every 2-4 days for the last 2 years - so I assume it's a territorial reaction. Incidentally, when Tia first came home 5 years ago (to a different house, brother's ex's place) they called a behaviourist, and he told them to ignore her and keep walking - apparently it worked, for the little time they bothered to do it).
That's my experience at least - ignore her and make sure you have plenty of room, don't restrain her, at least you might keep her stress levels down while a solution is sorted out. Do call a behaviourist though, you really need someone to watch her react in various situations so they can advise you how best to go on.