I am a firm believer in the power of positive reinforcement. Being a professional dog walker for 15 years, I have witnessed first hand how effective this is as a training method. When dogs are barking and lunging at the end of their leashes, it helps to stay very calm and place the dog in sitting position (if possible) with focus on a treat rather than the passing dog. Lots and Lots of praise for even the littlest accomplishment. The idea is to give the dog something to look forward to when they see a passing dog rather than something to fear and have anxiety about. This does not happen overnight, but it will improve with consistency.
http://shepherdlover.hubpages.com/hub/Reactive-Rover-Tips-for-Training-Leash-Reactive-Dogs