Our Buddy has killed four squirrels since last summer, all of which were in our backyard. I was so shook up the first time it happened, but I have come to terms with his animal instincts. I know he would kill a bunny if it came into our yard, but so far they have all been smart enough to stay on the other side of the fence. He is fine indoors with cats, but I don't know how he would react if he saw a stray kitten in the yard.
Buddy is the most gentle, loving, sensitive dog I have ever owned, and I would trust him around any people, including babies. He just has a high prey drive, and it's something that we have to plan for. We don't open the door to let him into the backyard without first jiggling the door handle loudly, to give the squirrels some warning to get up in the trees!