that sounds a lot like Gonzo when I first got him, he would hide from kids and avoid them completely. . when puppies are frightened of something, they usually hide or run away, but when they grow up that fear can easily turn into aggression.

With Gonzo, I desensitized him to kids very slowly. We'd hang out in a park where kids were playing far away, and if the kids came up I'd tell them he was scared and to please don't run up to him. Slowly, get closer and closer to where kids are playing. If she starts to freak out and hide again, move farther away. Make it a positive experience every time kids are around. . play with her, train her, give her treats. After a lot of desensitizing her to seeing kids playing, find a very nice gentle kid (maybe a relative?) to slowly introduce her to. Have the child hold out their hand with a treat, and allow Lucy to approach them, NOT vice-versa. Only allow kids to pet her on her chin or side, not on top of her head. Don't get into any situation where Lucy in on-leash and cornered by a child, it could reverse the whole process.

Gonzo is still shy with kids, and he occasionally barks at some that are running up to us but he never tries to lunge at them or threaten them. But he actually licks most of the kids we meet and is pulling on his leash to greet them. The first 12 weeks of a pups life are the most important in socializing them with children, I think you didn't adopt Lucy until after then?. . So, this could be an ongoing process of socializing and desensitizing for most of her life, but she'll be 100% better if you get her used to kids while she's still a pup