Dogs are just dogs, they are not evil. A bad dog is the result of abuse by humans. Dogs are highly social animals they have earned the title mans best friend for years of loyalty. They have for centuries guarded flocks and herds of animals and have given their lives to protect the ones they regard as their "pack" = owners, and families. There are millions of people in the world who rely on seeing dogs and hearing dogs who tirelessly assist there master or mistress who may be blind or deaf in leading an independent life. There have been studies undertaken that show elderly people live longer if they have a pet dog. Owning a dog as a child teaches the child the responsibility and importance of caring for others.
But because your Prophet did not like dogs and was afraid of them, then you also think the same?
No, we don't shy of dogs because our Prophet "did not like them and was afraid of them".
Exactly, where did you get that he was "afraid" of them? Disallowing something does not automatically translate to fear, although to an ignorant individual, it would sure plant seeds of doubt in second-guessing their Prophet and believing him to be a weak individual who did things out of fear.
But I digress.
Firstly, we don't blindly follow his personal preferences. We follow what was revealed to him through Divine inspiration. This is based on faith, so the one without it has zero hope of understanding this point. But any adherent of any other faith will state the same when it comes to defending their religious figures.
Secondly, Islam usually takes the flack for this but people fail to realize we're not the only religion that disavows dogs. In traditional Judaism, dogs are believed to be impure as well.
Scientific research (specifically by Dr. Gerald Finstimer) proves there's a basis to the argument of their lack of hygiene. Dogs not only bring a host of bacteria (such as pasturella) into homes but they can carry tapeworms, which can lead to chronic disease in human beings. At times it has even led to death. Although found in other specimens, it's only found fully-developed in dogs and wolves (rarely cats). Human contraction of it can lead to an incurable inflammation of the lungs, muscles, spleen, kidneys, and brain. We cannot allow our love for things to blind us from certain facts. And the fact is that dogs are not hygienic.
Islam isn't too big on them because purity and cleanliness are two major factors of the religion. Thus, anything interfering with that should be avoided as it hinders the believer from truly adhering to his/her faith. Much of the prohibition is for the purposes of disease-control.
In regards to your statement about the benefits of dogs on the lives of children and the elderly, that can apply to any animal, not just dogs. Ownership of any animal can promote values of compassion and responsibility while instilling feelings of love and companionship. Dogs are not the standard of achieving this.
Despite this fact, Muslims ARE allowed to keep dogs. Just NOT for the purposes of pure companionship. They can be kept for hunting, herding, protection, and disability assistance (just like you mentioned). Unfortunately, many Muslims are either ignorant of this face or simply let their disgust of dogs override this fact. As a result, Muslims are portrayed as barbarians towards animals based on their actions and people like you have misconceptions regarding what Islam really says about dogs.
I definitely agree that some Muslims take their disdain of dogs too far. Much of this is culturally based and in my opinion, absolutely pathetic. I once got into a public heated dispute with another TTI user who thought I was sinning because I had the audacity to call dogs "cute". Such extremism damages the individual perpetuating it first and foremost. Dogs are beautiful and loyal creatures. To believe that they are "evil" in any way is not only ignorant, but disdainful of Allah's creation. We all need to stop thinking in terms of black-and-white. Impurity does not automatically mean evil (just like disallowance does not automatically mean fear) and I really am amazed at the lengths some people will go to demonize dogs (in addition to the Prophet). If dogs were so "evil", sinners would not have been, not only absolved of their sins, but also granted PARADISE for simply feeding them.
Hadith - Bukhari 4:538, Narrated Abu Huraira : Allah's Apostle said, "A prostitute was forgiven by Allah, because, passing by a panting dog near a well and seeing that the dog was about to die of thirst, she took off her shoe, and tying it with her head-cover she drew out some water for it. So, Allah forgave her because of that."
Abu Hurairah (May Allah be pleased with him) reported: Messenger of Allah (PBUH) said, "While a man was walking on his way he became extremely thirsty. He found a well, he went down into it to drink water. Upon leaving it, he saw a dog which was panting out of thirst. His tongue was lolling out and he was eating moist earth from extreme thirst. The man thought to himself: `This dog is extremely thirsty as I was.' So he descended into the well, filled up his leather sock with water, and holding it in his teeth, climbed up and quenched the thirst of the dog. Allah appreciated his action and forgave his sins and admitted him to Jannah". The Companions asked: "Shall we be rewarded for showing kindness to the animals also?'' He (PBUH) said, "A reward is given in connection with every living creature".
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allowed dogs to be kept for hunting /security purposes. 
