Hi Nicole
I would also be paranoid about it. I would address the letter from the standpoint that you asked about this when you enrolled him and therefore, what they told you and what is happening is different.
Also, stress the safety concerns, tell them that you are worried that the dog may harm one of the kids, and that in the case that this happens, they would be responsible.
Its not reasonable for them to tell your 2 year old to stay away, because he does not see any threat.
Good luck xx