God, I thought I'd posted this and not remembered!!!! I have fell out with my parents over this - they have a 10yr old jack russell, completely boisterous and untrained. They refused to train it as a puppy, it destroys any toy with a face on, yet will leave ones without faces (!). What would it do to my kids?????
Please, do NOT let your in laws bully you on this. If they won't keep it out of the way or leave it at home, refuse to go round or have them visit. Their problem not yours. I used to have dogs and couldn't understand people's fears until I had kids - I can now!! Tell them to leave the dog in car or at home or don't bother coming. If they have no respect for you or your kids safety, they don't deserve to see them. DP is of the same opinion as me - he was bitten as a kid, so was I. Obviously your problem is defintitely more serious as the dog has actually growled and nipped.
This is what we had to go through with selfish parents:
When ds was born, I said I don't want the dog near him. I got the "oh he's all right, won't hurt a fly, loves kids only wants to "sniff" and lick etc. I flipped, cos I knew the dog runs at kids in the park and street (dad lets it off lead), "licks them all over" and barks at kids squealing. They said they will put the dog in another room but told me I was wrong as ds would have to "learn". When we visited for the first time, my parents insisted the dog had to "sniff" to get used to ds, I insisted it stay on a lead if it stayed in the room. I got the patronising remarks, and no respect for my wishes. It was strained every time we went, dog wanted ds's food, trying to lick him and jump on him. Also parents encouraged dog to go for his toys and asked if we had any old ones he could rip up - therefore associating even more with "violence" so to speak. On one occasion, ds made a noise, the dog barked and lunged at him. DS was terrified - he was about 8 mths old if that. We walked out and don't go there anymore. We have been to drop off xmas/birthday presents at the door, but I won't go in as I don't like the dog anyway, and the kids stay in the car. DS is 4 and DD is 2 - she has never been near it and it will stay that way. I have told them that until they show respect for our wishes, tough. We get sly remarks on every visit to our house "oh, we could do xyz, but YOU won't cos of the dog. It's YOUR fault ds is scared, I'VE made him like that. Don't think so, "mother".
My mother constantly whinges about dog hair, yapping when left, kennel costs, walking it etc - don't know why the hell she had it!! She's missing out, not us. MIL on other hand won't allow the eldest cat in when kids are there as she has total respect for kids safety and it is a psycho cat sometimes!
My friend has a puppy and ds was fine when it was really tiny - as soon as it got to jack russell size, he freaked and won't go near it now. He shakes and clings to me if we have to pass one and will go in the road / hedge to avoid them. He's not too bad near big ones, he just clings and says it will "eat him". DD is OK near dogs, so I don't think I am to blame for DS somehow - my parents are.
Please don't let your inlaws cause the same problems for you and your dd, if it causes trouble, so what?? You are protecting your child, YOU are not the "baddie".
We went to a friend from schools house party the other week and had to leave after half an hour because of dogs roaming round the house. They did try and keep the dogs out of the way, when we said ds was scared but they were still in the same room and I didn't feel I could say anything in someone else's house, without causing a scene or ruining the party etc. Ds was so upset, and I didn't want to say "oy, if I knew your dogs would be in here with the kids we wouldn't have come". I have no problem whatsoever with telling my parents to get theirs out of my sight!!