Hmmm not sure what others will say but my take on it is this....
When you are not around I agree the dogs should be separated as the worst can happen.
But when you are around I find it sad that the dog that gets attacked is locked up. Personally I'd be watching for signs of aggression in the attacking dog. Those signs would be met with a command to simmer down and if the dog did not simmer down, then the attacking dog would be locked up or met with some type of non-aversive punishment (AS THE SIGNS OF AGGRESSION ARE BEGINNING). On the opposite end, gentle behaviours would be praised.
I would think that with obedience training that you should be able to get the attacking dog to calm way down. YOU are the leader and the attacking dog should see you as the leader and obey you when you say SIT! or No!
If this is not happening then for me this might well be a leadership issue. In this case your job would be to get the dog to see you as the leader.
That's my take but i would be very curious to hear what other people with more dog training experience would advise.