[willy]

You are quite correct JJ in your analysis, I personally would have kicked that dog thru the front door, I would not care if it was the Pope's personal lap dog.
dogs like that are a menace to humans and should not be allowed to have contact with them, especially small children.
What everyone has said here is pretty much correct, I spent a three or four year period training dogs with people involved in something called Shutzhund where dogs are highly obedience and protection trained. Even these people who have many thousands of dollars and thousands of man hours invested in their dog(s) would not allow a dog that is too sharp as they put it near people at all. You see while I agree with the sentiment there are no bad dogs only irresponsible owners and that for many dogs bad socialization and/or cruel treatment is the problem with many dogs i will state quite emphatically that there most definetly are bad dogs. Period.
Some breeds of course are more aggressive by nature and have been bred to be so, a lot of dogs, due to the piss poor breeding practices in this country have bad temperments by genetic disposition.
If you ever go and spend time in Germany you will see the most amazing things, in Germany breeding of any dog is strictly controlled. A board of Vet's and breeders must determine the health of the dogs, whether the lines are too closely connected, the temperament of the dogs.
Any dog that is like your cousins is quickly removed from society as a menace.
The other thing you will see is the most beautiful healthy dogs walking with their owners on the streets on heel with no leash in sight, you will go to a very nice restuarant and be eating dinner and a man and women will come in and sit down with their German Shepard sitting right at their feet. Nothing is even thought of it.Quite amazing.
Anyhow I am reminiscing, sorry, you should advise your family of the danger of the dog, you should advise your family of the danger to the children, you should advise any other family or friends of the same and you should tell them nicely but honestly you and your family will not go there again while the dogs is on the scene. There are bad dogs. And bad owners, you may have a case of either or both, the only thing that matters is that someone acts as an adult and tells them so and acts accordingly.
In my family I have a similar issue with my brother who inspite of what everyone told him has a Pit Bull, he has three kids and the dog has been very good so far, stubborn and not obedient at all but no other issues. But I told him four years ago when he got it I and my kids will not come to his house unless the dog is put away, period. He has complied and there has been no issues to date and it will stay that way because when he at first let the dog out when we were there I literally went to grab my coat, he did the right thing and everything was OK after that.