We've had NiceDog for nearly 4 months; she's from a rescue, wonderful and calm at home but slightly spooky/lungy/growly out and about meeting new dogs, so we give them a wide berth and everything's generally fine. We go on different routes to vary things but sometimes come across a woman with her off-lead terrier puppy. She has no control over it at all and it goes nuts (in an over-enthusiastic way) at the sight of NiceDog. It runs straight at her, jumps up at her face and backside + darts around between her legs like mad. I've warned this woman that NiceDog isn't friendly - she's seen NiceDog lunge and growl at her pup before as I try to get away pronto. Instead, she just watches from a distance, arms folded, and says 'oh, he's just a baby. If she bites him that'll teach him a lesson'. WTF???? 
I don't want my dog to turn into a biter; I've tried yelling at her pup to back off, throwing treats to distract it, told her to put it on lead, asked her to grab it's collar and pull it away (which she didn't), but she just stands back and really wants NiceDog to nip her puppy as part of its training!
I don't want to lash out at her dog (I've been veeeery tempted to kick it away) but i'm running out of ideas of how to deal with this before it turns unpleasant.
Any ideas (apart from moving to another area)?