[Lizzie07]

I went to a two day seminar on dog aggression and the behaviorist said that the largest percentage of dog bites occur by intact males, against children 7 to 12 yrs of age, particularly little boys, by dogs that are tied up for 8 hours or more a day, by small dogs and one other thing, which I can't think of. Your situation certainly fits within the higher probabilities. I would certainly start with having your dog neutered. There could be a female dog in heat in your neighborhood that is influencing your dog, you never know.
I wish I could remember more of the seminar, but it isn't something I've had to deal with. I do remember that you shouldn't try to fix aggression with aggression. If you punish the dog for being aggressive, you could be reinforcing his fear, or reason for being aggressive, that he needs to protect himself.
Another thought is there might be a medical reason for his aggression, especially if it is a sudden thing and only occurs when he is picked up. Certainly talk to your vet about it when you take him in to have him neutered.
After having him neutered and making sure his health is okay, he needs to see children as a good thing. Make sure the kids NEVER tease him, or get too rough with him. Also, let them have short sessions (training sessions) where he gets super, super great treats just when the kids are in his presence and he is behaving, then progress to getting treats from the kids as he starts showing some improvement. Make the treats tiny bits, he doesn't need to fill up on them. It may take some time, don't try to rush it, you need to try to modify his behavior around the kids. Make him see the kids as a good thing. Do not give him anything unless he is quiet and behaving himself. Try not to reinforce any undesirable behavior.
Lastly, don't get discouraged, it may take some time and effort. You might even want or need to try a combination of ideas to help fix the problem.
Good luck, and let us know how its going.