Quite frankly, I think rehoming your pups back to the breeders is the best thing right now. I'm sure if your daughter was attached to the lamb she's not feeling very kindly toward the pups and probably won't ever. The hard part is that they now know how much fun it is to chase and kill. Not saying they can't be broken of this, but without serious controls set in place you won't need to. I don't know where you live but where I live I'm well within my legal rights to shoot any animal that comes on my property and harasses or kills my livestock. We call it triple S: Shoot, Shovel and Shutup.
I think if you care for your pups rehoming them is the kindest thing you can do for them. Not being mean at all - it's just that you're not set up to deal with these guys.