Like I said earlier, I think it's just his natural instinct to be afraid of dogs. I know he's not a real rabbit, but he can obviously relate to them in some way (remember "Can't keep a good Mac down"?) so maybe he shares the same fears.
You've all made good points about how the dogs see - or smell - IFs, but I don't think Herriman knows that. He just sees a dog and instantly assumes it'll attack him just because he's a rabbit. The problem is not the dogs themselves, but his phobia of them, which is obviously very bad.
The whole episode really proves your point; the puppies weren't dangerous to IFs, and the first one (I can't remember its name, sorry) clearly got along with Eduardo, so they probably do see them as humans. Mr Herriman, on the other hand, sees them as a threat to his life because of his species ("someone has let loose hounds to destroy me!"), so he becomes terrified at the mere thought of one in the house. Put it this way; imagine you were trapped in a large place with someone - or something - who was trying to kill you. You'd hardly be very happy, would you? (and yes, I do know they weren't trying to kill him. I'm just seeing it from Herriman's point of view)
So, long story short; dogs aren't really a threat to IFs; it just depends on which species the IF is meant to be.
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