My German Shepherd is exactly the same. Fantastic with me and my children, fine with the cats (bit scared of one of them actually!) and tolerates my other dog, but taking her out for a walk is a nightmare. She absolutely hates other dogs ...... and to be honest, other people. I'm not if she is ultra-protective or ultra-jealous, but she hates anyone approaching us. She has leapt over my pushchair to try to attack a dog which jumped up at it (stupid owner who claimed her dog wouldn't harm my child when it ran towards us) in the past, and seems to think anyone approaching us is about to murder me.
I do what other people suggest - halti on for every walk, and keep her muzzled when out of the house. I also muzzle her (cage type muzzle she can drink and even eat through) whenever people come around the house, even people she has always known. She's 8 now and getting a bit funny. Will quietly growl at certain people she has known all her life if they are in the living room with us. But dotes on my children and whined all night last night, as she knew they were sleeping in the garden in a tent, and hated being away from them.
She's never bitten or attacked anyone, and absolutely adores my children, but I think its better to be safe than sorry. She doesn't mind the muzzle, and I take it off as soon as guests have left.
When my eldest sons walk her (they're 19 and 17), I make them go to place where they are unlikely to encounter other people or other dogs, which is better than having her stressed or trying to control the situation.
To show her other side, I was once walking her when a very agressive husky cornered me, and my dog kept it at bay all the way home. It followed me, and my dog went for it every time it growled at me, and lunged at it, if the husky lessened the distance between us. On another occasion, some older kids were shouting at my son's friend and picking on him - my dog immediately stood between the friend and the older kids and raised her hackles.
Its all about being responsible and trying to think ahead. My GS is incredibly stubborn and no amount of training (she's been to obedience training, puppy group and dog socialising classes) but she still tries to do what she wants, and really has to be spoken to sternly to make her realise that I am the boss!