For a Red Sox fan, You're Not a Bad Guy...
Good job Ice...save the dog.
You should:
1. Socialize the dog. This means expose it to outside stimulation, other dogs, kids, people, stairs, elevators, Home depot etc. Its great that its curling up w/ your kids and your dog...but sometimes dogs can get too close to their family. Since you have a Shepherd, you probably understand territoriality.
2. Socialize some more.
3. take her to a puppy class... they don't learn much, but its fun and a good way to see how she reacts to other animals.
4. Buy her a Yankees hat to tear up.
All that being said, watch for signs of trouble...food aggression, guarding toys, snapping at kids. These behaviors can happen w/ any dog. Usually training will take care of them.