Firstly I do hope that your dog gets over its attack quickly and gets it confidence back,
That woman does have a responsibility to keep that dog under control and that includes keeping it in a secure garden/property, it may not be the dogs fault because it is nasty and protecting its "patch" but there is no room in the world for nasty dogs or incompetant owners who are not even fit to keep fly's never mind a dog ,
I Would not hesitate in attacking a dog with a stick or my boot if i felt it was neccesary, .....
It is your responsibility to ensure the police deal with this owner and dog , do not let them play on your soft side by suggesting it may have to be put to sleep, if it tried to bite you then it is a dangerous dog , end of ! you know what you have to do ,