It sounds like he is just afraid. I asked about the leash because some fearful dogs are more likely to react while on leash because they feel restricted and unable to get away from the thing that they fear. You have valid reasons to worry about him around children, especially the noisey running ones. If possible, try to avoid such children. Children are the worst when it comes to invading a dogs personal space. They often try to hug dogs, lean over them, are at right at eye level...which is why bites are often to the face when children are involved. Because your dog is showing such signs of discomfort, I think there is a good chance he may bite a child or even an adult if he could not move away from them when they approach or if they were to invade his personal space.
The general protocol for fearful dogs seems to be desensitization and counterconditioning. This involves taking him around the things that he fears but remaining at a distance where he notices them but does not react and making lots of good things happen while the fearful things are in view. Then you gradually move closer and closer while continuing to make great things happen. The idea is to change his emotional state...he should begin to look forward to the feared people rather than feel threatened by them. Once you can get fairly close without him reacting you would begin to have strangers "make great things happen" as they pass by....toss a toy to him or give him some extra special treats but not trying to interact with him otherwise. Visitors in your home should be instructed not to try to approach him and instead to allow him to initiate any interaction.
If you can, it would probably be best to hire a private trainer/behaviorist to enusre you are successful in modifying his behavior.
I also found some articles that you might find helpful:
(check out "fear of strangers" section)
Fearfullness Fearful Dogs BCSPCA - Reducing Fear in Dogs
Growling 
Linear Mode
