Do you say "No" or coddle her?

Neither. You never push her past her threshold. Never allow her to revert into her aggressive, growling behavior. This is the behavior you want to eliminate, so never give her the chance to show the behavior. Find out what her threshold is. At what point does she lose focus on you? At what point does she start to stiffen? When does she start to raise her hair? Figure approximately how far away Meaty can be and remain comfortable in the presence of another dog. STAY BEHIND THIS LINE, and use counter-conditioning techniques to help her associate strange dogs with good things.

It sounds like your dog has some fear aggression (especially on-lead). It sounds like this is your first experience dealing with this, so I too would suggest finding a professional behaviorist. Hope that helps!