I would ditch the prong ASAP and switch to a front hook harness, preferably the Freedom harness. Since he is 'reactive' (not in a bad way, but is still reacting) to dogs, pulling on the leash, in turn adding pain to his neck, can eventually make negative associations with the dogs he's trying to get to and he may very well become dog reactive in a bad way. He doesn't necessarily get that the pain is from him pulling, he just knows that dog in view=pain.

The hackle raising is a sign of over stimulation, it doesn't have to mean aggression or fear. It's called pyloerection.

Sounds to me like you have a lot of work that needs to be done on impulse control. Teaching him to control himself around things that make him want to go crazy. If you find a good trainer in your area, they can definitely help you out. I always recommend positive reinforcement/negative punishment trainers. This may require finding his reactive point (where he can still work with you and not react to the dogs) and slowly building from there. (Know that this may be hundreds of feet in the beginning) No one said it would be easy.

I wish you luck!