Little sister needs advice on rescue: Aus.Cattle Dog

I would like to welcome any advice about my dog. I got her at the age of 5, she's about 7 now, and we're doing quite well. She's a mix of Aus. cattle dog & rough collie. We've been through some training, and she's good at learning new tricks.
She does show some aggression though. While she's great off leash in dog parks now, she's more of a handful around other dogs when they're on leash - then she's showing aggression.
As well, if a stranger approaches to pet her on leash, or a kid starts running to her, she takes it as a threat and makes a scene. Now I've read that the A. cattle dogs tend to be stranger shy, but-
Is there a way to desensitize her to strangers and kids without putting anyone at risk?
I'd love to hear any advice out there, which I will of course, screen for sensibility.
Thanks to all.

With my last dog he disliked strangers, approaching us as he thought he was prorecting me, so I wouldn't allow strangers to touch him. People could come up and talk to us but if they got to close he would bark at them, at 120lbs no one pushed the matter. But I must say he was never like it with children, he loved all children, they could always approach him.

Your dog could feel the same way that when on leash it has to protect you. I've seen where you get people come up to you and you reward the dog when it behaves the way you want, and correct it when it doesn't. You can do it with both people and other dogs.

There is also another thread about this www.pets.ca/forum/showthread.php?t=23124
hope this works

That is called leash aggression, many dogs do have it. They feel confined on leash. They feel the must protect, mainly because they fear the can not run away. If you see another dog, Train her to sit nice and stay whil the other dog passes. Make her obey you, get her to focus on you.....Training

Thanks heaps to the couple of people that have responded already - it does makes sense.
I guess one other thing that disturbs me a little is a good method of "correcting". When she behaves like this, of course I'm trying to put her into place, and she's jumping around practically strangling herself on the end of the darn leash until finally she settles down. Even with this correction, and my praising her when she does calm down, we haven't seemed to improve too much. She forgets herself, and is worked up too high-strung to listen much.
One trainer told me not to let her "mark" everywhere, as she is territorial. I don't know - I do curb it off, but to what extreme.