It sounds to me that the dog is taking the kids under her wing as if they were her own pups and when you go to touch her or go near the kids she gets aggressive because she wants to protect her "pups."

But it is also very good that you got her a vet appointment, maybe the vet can give you good training advice to get her to stop 'protecting' the kids.

Good luck with everything, I will pray for you and your terrier