Thanks for all of the suggestions. Bailey's really well socialized to other people/places/car rides. She loves people and car rides. However when she was a puppy I didn't know anyone with dogs to get her familiar with them. Let me clarify a little bit. The situation is usually not Bailey sees dog, barks wildly, and I pick her up. The first time we ran into a couple who had two smaller dogs I stopped nearby so she could see/smell them. The other dogs were investigating her too. But when one of the dogs got too close for comfort she started growling and I saw that she was about to get nippy so that's when I picked her up so we didn't have a bite situation. She's usually more growling at the other dogs than barking. With big dogs I do get more nervous and sometimes pick her up when I see them coming, because I know she could still get hostile towards them and if they respond she'd have no chance. She's so small, under 4 pounds.
I see how turning and walking her the other way makes more sense than picking her up, but she freezes and won't walk. I'd have to drag her. She's actually been doing that more lately on our walks, even if there are no dogs around. She's getting me to hold her a lot just because I want to keep moving.
Last summer I actually took her to a dog beach and though I never took her off leash she was fine. She didn't get too close to any other dogs but was able to observe them from afar.