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It's important to remember that dogs have different drives. Amongst them are defensive drives (fight or flight instinct) and prey drive. Different breeds exhibit different amounts of these drives, and dogs like yours and mine Loryn have high prey drives. That combined with their intelligenve is what makes German Sheppards excellent police dogs.
A police dog that is "attacking" or even searching is being exercised in prey drive. In the case of searching, they are trained with toys. They locate the smell they're being trained for, they are rewarded with the toy. It becomes a game to them.
Dogs with high prey drive can often get confused with children. They recognize adults, and how they behave and submit to them. The jerky movements and high pitched laughter and screams of children, however, is easily confused as prey. Something they should chase and catch. This is how a dog that is not aggresive in even the least can be expected to behave in what might appear to be an aggresive manner to children. The reality is they don't want to kill the child because they're aggresive, they just want to chase and catch the child.
Sounds like you've learned an important lesson today. It's always the responsibility of the dog owner to make sure these sorts of interactions don't happen. I won't take my dogs in an area that I can reasonably expect to be in close quarters with a child. My dogs have never displayed aggression of any sort to anyone, but none the less I feel it's my responsibility to make sure no accidents happen.
Obedience training is an excellent idea and it's very good for the mental health of the dog too. The learning, performing, reward process is very satisfying and it makes a dog more stable in general. I still suggest that you keep a buffer zone around your dog and children though. I wouldn't sit on on a bench with the dog along a path where children are riding bikes. On the other hand, it's also reasonable to tell a child running towards a dog through an open field to stop, and go around the dog.
Just my 2 cents.
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