I've had the same trouble with Belle. She loves her fur-brothers, but she's very timid around new dogs. She "graduates" from her first class tonight and she has improved a lot since the first night. We're going to continue to bring her to training classes and try to get her to meet more dogs. She met my fiance's mother's 25 lb shih tzu a few weeks ago and it went pretty well. Next up she needs to meet his dogs (but they are in Tampa)
Anyway, it sounds like you are doing all of the right things in socializing little Katie Scarlett. She may never be a social butterfly, but at least she will know how to behave around other dogs