Now, does she actually bite/lunge at them? From what you've given us, it sounds like she's terrified of them, but it doesn't sound like she's actually *aggressive* towards them.

Is there a very polite and calm child you know? Ask them to sit on a bench in the park, and hold a piece of plain, boiled chicken on their open hand. Walk Daisy towards the child until she starts showing signs of anxiety. Stop walking, direct her attention to you, and start praising her lavishly. Try walking closer and closer, but *never* allow her to get too scared and anxious. If she gets to that point, you need to take a few steps back and start again. Eventually, you want to get close enough to the child so that Daisy will take the treat from the child's open hand. Tell the child not to look at Daisy and to maintain a very relaxed composure. When Daisy starts taking treats from the child's hand, let the child slowly run her hand on Daisy's neck or chest area. Most likely, she's going to freak out so one method you can try is feeding Daisy yourself and while Daisy is distracted, let the child pet her. Keep reinforcing the idea that children = treats and praise and love! When she starts readily taking treats from the child's hand, you can now ask neighborhood children to feed Daisy a piece of chicken or two. For now, though, stick to friendly and polite children. Good luck!!

ETA: Buy The Cautious Canine by Patricia McConnell. Lucky has severe public anxiety and Ivy is a bit fearful herself. A good trainer and Pat's book have been invaluable to me.