agressive toward people

Just my [sm=2cents.gif], but I do have an aggressive dog and know a little something about this type of thing.

I don't see the need to risk a child getting bit.  I would forget that conditioning technique that involves the kids and keep him separate when the kids have company.  What's the big deal anyway, why does the dog have to interact with all the friends. 

I would work on the conditioning with adults if I was going to risk him being around strangers at all.  Just be careful, my dog has a way of being very nice and sweet until the treats are gone from the person and then she gets funny again.

good point willow
 

coweringly rolls onto his tummy

OK, so when he is being "aggressive", is he usually backing up, or is he lunging forward?  Does his behavior change if he is off leash versus when he is on leash?
I agree with Lori that you should not put kids in danger.  If this turns out to be fear, though, using one child at a time to toss treats onto the floor from about three or four feet away, while you have the dog on leash and are telling the dog "say hello" or "treats" can be useful.  The object is to teach the dog to look for the reward on the floor, to not feel as threatened (since the kid is four feet away, not within reach), and to keep both safe from one another.  I would not do this with a child who is too young to follow directions well, and I would not take the chance if the dog has punctured skin previously.

lunging forward and snarling

edit:  oh, and its the same whether hes on or off leash , and its the same way he acts with motorcycles.
 

His sure is rotten little stinker isn't he. He thinks his the man of the house and he has to protect you and the kids. It sound like assertiveness behavior.

Dogs that go forward are sometimes acting assertively, but they can also be thinking that the best defense is a good offense.  That's why I asked how he is off leash, if you know.  Some dogs, once off lead, are not aggressive.  But, on leash, when they know there's no escape, they are.
Read "Feisty Fido" by Patricia McConnell, and see if you recognize his m.o.

What's the big deal anyway, why does the dog have to interact with all the friends.

The "big deal" is that it seems both running, screaming children and their dog are staples of their life. This problem should be addressed, not avoided.

Avoidance can blindside via our human fallibility.

B.B

well, only MY running screaming children are part of our daily life and he is totally fine with them.  its just the running screaming friends that he has a problem with and they arent here every day.  maybe a couple times a week for a few hours.
 
edited to fix typo

A friend of mine has a husky mix and is fine with "her" kids but bit the neighbor's kid.  Number one you need to keep the other kids safe from this dog.  I would seek a trainer and or dog behaviorist to fix this problem rather then band aiding by crating.  You don't want a possible lawsuit for oops the dog wasn't in his crate.

Oh- I tried the tossing the cookie routine for my scared dog.  It only terrified him more when a visitor tossed a "rock' at him.  He would run from the room terrified.  Meanwhile, my freindly dog grabbed all the cookies.  Even him witnessing her happiness with strangers did not help him at all.
 
What is your other dog doing during all this?  

Good book to read is "Ceasar's Way".  A book about Dog Psychology and your part in creating a balanced-minded dog.  Covers aggression very well.
 
Author is Ceasar Millan.

Your dog is being the dominant pack leader.  Do you walk you dog a lot?  If not, you need to begin an aggressive walk schedule to re-establish that you are the leader.  It sounds like you anticipate his aggression, so you think by locking him away there won't be any aggression.  I appreciate you wanting to protect both your friends and him, but you are not correcting the issue that he thinks he is in charge.  
Read two books on this issue, "Ceasar's Way" by Ceasar Millan.  Covers aggression very well and how you may be contributing to it.  Also "Dog Psychology" by Bruce ....I can't remember his last name. But he is a vet and covers Dog Aggression very well.  You are upset because your dog who is sweet to you and your family, is not that way to his surrounding environment.  This is not a human, this is a dog and he is trying to get you and your family to behave like a pack.  That is ultimately want will create a happy dog owner and dog.  Read Ceasar's book.... I telling you it's awesome. 

Emma LOVES  ALL people and is not afraid of anything but being alone.

The "big deal" is that it seems both running, screaming children and their dog are staples of their life. This problem should be addressed, not avoided.

Avoidance can blindside via our human fallibility.

Jaye--Ultimately it's going to be up to you to decide what is best.  But, listen, I love my dog more than anything but she is just not able to be around people the way other dogs are.  Maybe I have decided to pick and choose which things I'm going to work on with her.  But, my biggest issue with training her to be with other people is that no matter how well they do, they are still going to be unpredictable in the situation.  So, maybe I do "avoid" the issue but I'm protecting her from making a mistake and I'm also protecting other people from her biting. 

Aside from all that, I still stand by my original comment, why do other kids need to be around him??  I wouldn't want my kids around an "ify" dog at a friends house.  As great as the supervision is, I'm sure, you still can't control everything the kids and the dog do. 

I keep my dog in another room when company comes over.  She's my dog, she's not there to be everyones "toy". 

I think that she's actually much happier being away from a situation that she's not comfortable in.  Maybe that's how Jaye's dog feels too??

I'm in complete agreement Lori.  As much as I care about other people, kids or dogs getting hurt by my fear-aggressive dog, my main concern is what that would mean for her.  I could just take chances, but ultimately, if she does bite someone, it could mean having to make a decision I never want to have to make.  I am actually better at predicting her behavior than I am at predicting other people/dogs behavior and for that reason, I don't take chances.  I'd love for her to be a part of everything we do or party we have, but that's not possible and I know it's in her best interest to keep her separated.