Hi,
When my golden retriever meets other dogs, he focus on the other dog
and will lower his body more and more until he finally lies down and
refuse to walk further. Almost look like stalking/herding. He will
then lie like that until the other dog comes over. If the other dog is
passing us, he usually "charges" over to the other dog just as the
other dog is starting to walk away from us. That charge is usually
friendly but if the other dog show any signs of agression, he will
bark a lot.

There's a pretty bad movie of the crouching/lying down behaviour here
http://www.youtube.com/watch?v=xOV2AitBkOw

While he seems wary, he is very interested in meeting other dogs, so I
originally thought he did this just to stop me from walking away from
the other dogs, but I'm wondering if there may be more to it. He does
tense up when he does this (It's a bit hard to see, but his mouth goes
from open and relaxed to closed in the video clip.), and he seems wary
of the other dog until he's confirmed friendly. (I've started trying
to ignore him, and greet the other dog first to demonstrate
friendliness.)

BTW, He's a bit timid and easily scared, possibly because the previous
owner trained him with the rolled up newspaper method.

What's the best way to stop this behaviour? Once he starts focusing on
the other dog, It's almost impossible to get contact with him. I'm
currently rewarding him when behaving and he's getting better at
passing dogs that are off to the side (eg. other side of the street.)
bit improvements are slow.

Why are you subjecting your "shy" dog to the direct approach (face-on)
of another dog? This type of approach is a threat. Your dog is being
submissive. but in a guarded manner.... like he's expecting trouble.
And if he is staring at the approaching dog, that is a form of
challenge, regardless of his position. It is based on his fear.

Turn your dog.... using a treat as a lure, if necesary.... so his side
is toward the approaching dog. This sends the message that your dog is
not interested in making a challenge. And YOU make it clear to the
owner of that other dog that you do not welcome that dog coming close to
yours.

Do Not permit your dog to charge after the departing dog(s). Who is in
charge here? You need to be, not your dog. The law says so....
Your dog is taking a walk with You, not with the other dogs. He is
chasing them away, not inviting play, if he's barking.

"You will spend Much more time protecting your dog than your dog will
ever spend protecting you." Old Dog Trainer's adage.

To build your dog's self-confidence and his trust in you, plus teach him
that it's just fine to be near other dogs without being involved with
them or making noise, take him through a Good basic obedience class.
Good basic obedience classes are not given in chain pet stores. Ask the
staff at your vet clinic who offers the best classes in your area. You
will also learn how to teach your dog effectively, efficiently and
humanely. His lack of self-confidence has Nothing to do with his
previous owner; it has to do with his lack of trust that you will not
place him in a threatening situation where he will have to protect
himself. Class work is with other dogs and plenty of distractions...
much more what you need than quiet private instruction at home.

And while you two are standing there, waiting for the other dog(s) and
owners to get out of there, feed him tiny treats, one at a time, almost
as fast as he swallows them, and talk to him, telling him how super he
is.

For treats, use something soft and smelly; Pupperoni broken into
pea-size bits, bits of string cheese, 1/4 inch cubes of leftover meats
from last night's dinner, other soft training treats. You are not
feeding him a meal, just incentives. NOT broken up dog biscuits, which
have little odor, and little flavor. Those are for at home and
relaxed.....

There is no reason to require him (by your restraint) to interact with
strange dogs, especially multiple strange dogs at one time. Further, if
you are holding the leash tight between the collar and your hand at the
time, you are encouraging aggression, because the dog feels that he Must
protect himself, because he has no freedom of movement. In a good
obedience class, you will learn how to hold his attention on You, not on
other dogs.... without pulling on him.

So get the two of you enrolled in a good class and learn to solve your
problems under the supervison of an experienced professional level
instructor who understands canine behavior and can also teach you to
train your dog using techniques that fit both of you.

Jo Wolf
Martinez, Georgia