this little dog has been through sooo much. is she the one that was used for breeding? now her owner can't use her anymore? if you decide she won't work in your family i hope you contact Yorkie rescue through the yorkshire terrier club and let them find her a forever home.
did the previous owner give you anything that was hers to take with you? a blanket, toy, something to comfort her? was she used to an expen or a crate?
if I were you, i would try to create an environment that is as close as what she was used to. Find a safe, quiet place in your home. give her time away from children and the unfamiliar for a few days. bring her treats and give her love and when it is safe for you to do that...let the children, quietly and one at a time give her a treat.
A tiny purse dog may sound like fun but you are not at the stage in life where that will work too well. If you read the message board enough you will see some of the horror stories about small dogs (or pups) and little feet running around them. the two do not mix!
the website to find a new home is
www.ytca.org
good luck