I'm not an expert by any means but IMHO I wouldn't try to rehab a child-aggressive 3.5yo, if that means you want to trust her with children.
I'd work on obedience diligently, and I wouldn't put her in any situation around children off-leash or up-close. She should be able to learn to control herself leashed when children are around, but I wouldn't count on making her kid-safe. Too much to risk for the child involved, not to mention the dog.
Personally, with a young child coming to live with you, I'd rehome with full disclosure.
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