Hmm.. You said the dogs tail is wagging? Is there any chance that the dog perhaps is trying to get the cat to play with her? It's not uncommon for dogs to growl etc. when they play together. You did mention her hackles were raised as well.. which a lot of the time is a sign of anger but I have seen dogs raise their hackles when they play as well.

Not saying it couldn't be fear aggression tho'. But the barking and tailwagging got me thinking about my Leo and Taggart, so I just thought I should give my two cents

I have two dogs and a cat myself, so I've seen my dog Taggart trying to play with the cat several times. He'll do almost exactly the same as you described. Bark, growl, wag his tail and "punch" the cat with his paws and of course do the typical doggy play bow as well. Does your dog do the bow as well?
Most of the time the cat just ignores him (he's grown up with dogs, so he's used to them acting stupid :P). Your cat is probably reacting by hissing and getting scared because he isn't used to dogs trying to play with him so he interprets it as a threat.