I definitely think he can get over, or at least lessen, his fear of other dogs, but I highly suggest asking the trainer for help, or finding a trainer familiar with aggression/fear/anxiety issues to work one on one with you and payson. youre right that he is afraid of moses, the fact that he is avoiding eye contact with him is a clear indication of that. I wouldnt suggest you keep doing what youre doing with moses though, because it can be difficult to identify what level of interation is too stressful for him, and you dont want to push him too far accidentally, you always want to avoid reaching that point. a professional can help you learn to recognize his stress signals, and what triggers them, and of course teach you how to desensitze him. I suggest you seek out a positive-only trainer, (clicker trainer). personally I feel this is the only method of training anyone should use lol but those methods work best especially for this type of behavior problem.
(http://www.sfspca.org/academy/referr...l#other_state, http://www.apdt.com/trainers-and-own...ner-search.php)

as for in class, have you talked to the trainer about it?? all the trainers Ive worked with often have to set up a visual barrier (blankets hung over an ex-pen surrounding the dog so it cant see any other dogs) for dogs like payson. often over time the dogs get more used to class and can get rid of the barrier, but of course this isnt always the case. both my dogs are very dog-reactive, and alki has had to stay behind a barrier in obedience classes so far. it definitely helps, although he may not be able to be in a group class yet. his fear may be causing him too much stress. again a trainer would be able to identify if this is the case or not. also, you may want to try using more exciting treats, though this may not make any difference. you may not be able to do any actual training in class with him yet, it may be too distracting. does he eat treats at all in class?? if so you can start just working on rewarding focus and/or ignoring the other dogs, even if for only a split second. for example, he is staring at another dog for 5 mins, then he glances away for a second- you click + reward, or better yet, he is staring at another dog (or whatever else) then glances back at you for a second- you click + reward. but again, I definitely suggest discussing this with the trainer, s/he will be able to give you advice. and also, the fear issues may be contributing to the in class issues so definitely bring that up as well.