I am not a behaviorist, but I have some limited experience with training. Of course, a forum is not the best way to provide training tips as I don't know your exact situation and am not able to evaluate the household dynamics and pack structure, but I would seriously consider getting someone to come and evaluate this behavior.
In the meantime, I would seriously restructure my relationship with the dog. Take him back to ground zero. First and foremost, he must NEVER be left unsupervised with any children not even for a few seconds. He must work to earn any reward whether its a treat, or interaction with you or another family member. Privelages must be earned. He must sit, stay, come, wait, etc. before doing anything or getting anything. This should be the case even when you don't have visitors. I would also consider keeping a leash on him in the house. Some people call this "tethering" or the "umbilical cord" method. That way you have access to him at all times. This will also give you more control over him and his proximity to her. They should not be close enough to each other to allow him to nip at her. If he is inappropriate to her at any point, he is scolded in an unemotional tone and is removed from the situation. Becoming overly emotional and overcorrecting could stir up more emotion in an already "alert" dog which cause more of a problem.
There is also a balance to find with growling and it is hard to judge what to do in your situation but I would be careful to not get into correcting him harshly for growling. You don't want him growling at people but, Growling is a signal that the dog is upset and it is his way of giving a warning. You don't want him to loose the warning signal and learn to just go straight into nipping or biting. If he displays any sort of inappropriate behavior, raising his hackles, growling, staring, etc. He should be again unemotionally told NO and removed from the area as quickly as possible with as little talk as possible. He must know that without a shadow of a doubt, you will not allow this behavior with those you have accepted into your home and that his inappropriate response is what landed him outside the room and in isolation. When she or any other child is around and he is behaving appropriately, you could try creating a positive association with them by giving him some special yummy treat that he is not allowed except when they are there and he is appropriate. As he was not exposed to children for most of his life, this may take a LONG time. You must remain steadfast in your retraining for his safety and the safety of everyone.
Some other things to think about or consider are:
* What is setting him off? Is it that she has a shrill voice? Is it the activity? Is it the quick movements that children make? Pay close attention and see if you can identify any triggers. This would be useful info. for future training.
* Also, is he getting enough exercise? I tired dog is a more manageable dog. You might even consider taking him for a walk or playing a game with him in the backyard before children come to your house. This might help to take some of the "edge" off him prior to their arrival.
Again, these are only suggestions and food for thought based on your brief description of the problem. You best bet would be to have someone evaluate the situation and give you more situation specific advice. You are right to be concerned. This is a potentially very dangerous situation. I commend you for trying to get help. Do not give up on this. Good Luck!!! Do some research, make some phone calls and see if you can find someone to help you. Sending good "vibes" your way for the training.
---------- Post added at 02:38 AM ---------- Previous post was at 02:27 AM ----------
Oh yeah, one more thing....
Do you have a crate? It may be that you have to crate him while children are over. This has other considerations that go along with it and how to do it in the most effective manner. Also, the children would have to be clearly instructed not to bother him while in the crate. There are different options in how to do this and as I don't know the exact severity of the situation (although I do consider any nipping of a child Severe), this would be something to talk to a behaviorist about. There are so many "unknowns" in situations like this, it is impossible to give any hard, fast instructions on what to do in this situation. I hate to hear that you are dealing with this and hope you can find someone to give you the assistance you need. Good Luck!