Sorry your wife has lost her dogs, Jix.
I think you have a talking point with her now about which is more cruel, letting them get hit, or putting the dog fence collars on them. Dogs aren't stupid (usually), and even the toy breeds learn very quickly not to get close to the flags and buried wire, hence, it stops being "cruel" to them.
The difference in the posted versus the actual speed really isn't going to make any difference on your road. A little shitzu isn't going to be any more avoidable at 55 than it will be at 100 (or even 230 on a motorcycle); the driver would have a second to see it, notice it's not a plastic bag blowing across the highway, and decide to hit it, straddle it, or swerve to avoid it. I really dislike hitting anything even the size of a bunny, squirrel, or shitzu at 55; but 'm not going to swerve much to miss or straddle either. It all depends on where the obstacle is when I get to it. If the animal hunkers down and I straddle it, it's scared, but safe to live another day. But if it acts like an armadillo, it's not going to make it. (Armadillos have an instinctive reaction to threats of leaping straight up when scared (a survival trait when attacked by rattlesnakes or canines, not so good for cars or trucks), which makes a distressing banging noise on the undercarriage of your vehicle, in addition to terminating the life of the 'dillo.)