
My pup was wary of EVERYTHING when he first started going outside. I was very worried about his shyness around strangers due to the fact he's a guarding breed so I spent a lot of time with him outside of the school waiting for my boys as he found children much less scarey, he enjoyed the attention from the kids and while being fussed by all the kids he didn't get frightened of the adults.
When out without kids about he would get a treat as soon as a person came into view, he soon associated people with treats, but as I had focused so much on simply making a positive association I was soon faced with a huge puppy that was very exited to see people and I had a job to hold him :( You really wouldn't beleive that this huge dog who now wants to say hello to everybody was a shy little pup that would lay on the floor and wet himself because he found the outside world such a scarey place.
I think the way you are doing it (sit & treat) is great as you are also teaching pup to take on the sit posistion, so when she finally realises people=treats, she should already have some manners :)
I'm sure an experienced poster could offer you some more advice.