Bonding.

Question
We brought home a full-breed Jack Russel Terrier a few years ago. He is sweet if not a little annoying and territorial. Well, last month I was at a local pet store that hosts pet adoptions and I ofcourse found a very darling dog that was in need of a good home and brought her home. The JRT is not neutered-however, the Australian Shepherd/Spaniel mix is. She is also trained and very well behaved. She is not the problem. When I brought her home I expected there to be some friction, but I did not expect the little crate-trained JRT to go 'Cujo'. It seems he's afraid of her--although she has never engaged him or gave him a sense of fighting. Just the opposite; she would love to play with him, however, he is just so darn angry at her.
The shepherd is a very sweet dog and very friendly upon encountering another dog-and has NEVER indulged the JRT in fighting or even seeming aggressive.

I could understand that the JRT would be intimidated by her size--but she hasn't approached him in an aggressive manner. Ever.

(Before suggesting I neuter the JRT..please bare in mind that the owner doesn't want that. He would be very angry at me if I did that, although I know the testosterone has to be some of the problem.)

Anyway; because the JRT is like this, the two do not get to play--and I know that my shepherd really does want to play with him.

Is there any way to fix any of that? It bothers me because Holly (shepherd) really wants a friend to play with. :/

Answer
the JRT is a very intelligent, very very tough and independent little dog that requires HEAVY socialization to other dogs from a very young age.  It appears that has not been accomplished.  He may or may not be "afraid" of your ShepX; he may be demonstrating territorial aggression. I can't see that from here.  :/

the JRT has a very, very high prey drive and responds WONDERFULLY to play training. Here's a site on the topic:
http://www.dogplay.com/Activities/obedience.html

Introduce this to him and then take him out, on leash, with the other dog (also on leash with your partner holding the leash).  Every time the JRT demonstrates any aggression toward the ShepX, use the play training article to redirect it.  Do this over and over, no matter how long it takes (this time should shorten with each outing) until the JRT fully and readily accepts the ShepX on walks with no displays of aggression.  He will ALSO be learning that play (and, obviously, responding to commands) accompanies the close presence of the ShepX.  Once you see absolutely NO demonstration of aggression or negative behavior in the JRT on these walks (and this could take a few days or a week or so), bring the play training INDOORS.  Here's how: put the JRT on indoor leash (so you can "capture" him easily without putting your hands on, as touch is a primary reinforcer).  Allow the two dogs to interact and closely observe the JRT.  If he begins any display of fear (watch his body language very closely) or aggression/territoriality (watch his body language), pick up the indoor leash and redirect him with the play training object.  Do this over and over (as you did outside) until he begins to associate the ShepX with play and performance.  Meanwhile, go to karen pryor's website and learn about clicker training.  Once the JRT has stopped his automatic display of aggression indoors and out, use the clicker to signal TO HIM ALONE (leave the ShepX totally out of this) whenever you see him display acceptance behavior or calming behavior toward the ShepX (read Turid Rugaas' book on "calming signals", VERY IMPORTANT that you can recognize these signals in both dogs).  Click/treat EVERY SINGLE show of appeasement, friendship, acceptance, etc. in the JRT every time he is with the ShepX.  All of this behavior modification may take several weeks (or even a few months), but it will work.