Displaced aggression/excitement

Ulysses has developed a new behavior today that is fairly concerning in a rescue dog with a bite history. He is fabulous and wonderful on leash almost all of the time, naturally walks on a loose leash, and has gotten much better about taking treats while we're walking. He ignores people and bicycles and skateboards and comes back to check in whenever I stop or pull on the leash. As an added bonus in my the-leash-law-doesn't-apply-to-my-friendly-dog town, he has been very good about greeting loose dogs that come racing up.

The only thing he doesn't do well is pass other leashed dogs. It doesn't appear to be aggression, he doesn't hackle up or growl. Instead he bows and then jumps straight up while barking. until we get out of range. He remains very bouncy and excited for several minutes afterward.

This feels like a very different issue from Brisbane's anxiety about other dogs. It's also the only thing that Ullie gets over-the-top excited about. Today we had to pass a leashed dog on the trail and he turned around and mouthed my arm while I was holding his harness. If I just hold his leash he bounces and occasionally spins but doesn't go for my arm.

I'm handling it like I do pretty much every behavior problem: stuffing food in him. This feels less safe when he is so excited that his teeth clack together as he goes for the treat and misses. He won't always take the treat.

When I can get enough distance we're ok, but that isn't always possible. Crossing to the other side of my admittedly tiny street isn't far enough. My options are to either pass as quickly as possible by dragging him and then wait for him to finish bouncing, or stand still and let them pass and then wait for him to finish bouncing.

He gets to the point of accepting treats when he is still very snappy and bouncy now. To spare my hands from his teeth, I'm holding them in a closed fist and letting him mouth and then back off before opening my hand. This seems to involve less snapping and gives him a chance to practice a little self control.

Any thoughts? Better ways to handle passing leashed dogs? Reassurance or dire warnings about the turning and mouthing my arm while I hold his harness?

A couple of suggestions

I have a couple of suggestions that might work. You could try walking him with a halti which will give you more control and he may be less likely to try and bite you. He won't like it at first but will get used to it and it won't harm him.

Another idea would be to see if there is a dog walking group in your area or even find a friend who you can walk with who also has a dog on a leash.
Then before actually going on the walk let the two or more dogs say hi to each other and sniff etc and then start walking. It might take a few walks to get your dog desensitized to other dogs on leashes. I run a dog walking group in my area and we sometimes have dogs come along who are either timid or have a little aggression to others and we find that over time they get used to the other dogs and all walk together nicely.

Hope that helps.