I am sorry to hear about your problem with your dogs. I am a veterinarian and will do my best to help.
Are both dogs spayed? Are they both female?
Two female dogs that fight is one of the most difficult behavior
problems to treat. If one of the dogs decides she does not want to live or tolerate the other, and starts a fight, in my experience it will happen again, and the next time will be worse.
If you want to keep them both, they have to be separated most of the time. You can have them together when you are there to supervise, but when you are there, I would have head collars, like Gentle Leader or Haltis on both dogs, attached to long light leads. That way if they approach each other, you can call one away and if the dog does not come to you, you can guide her to you with the lead.
WIth behavior problems, you have to be proactive, to reward them for good behavior. Being reactive, and responding once a fight has started or happened does not teach them to change their behavior.
In this case, that means rewarding the big dog for not reacting aggressively to Michelle, and for rewarding Michelle for leaving the big dog alone. Every time Michelle approaches the big dog to play, you have to call her away, reward her from coming, use the lead attached to the head collar to make her come if she does not, and then offer her an alternative to trying to play with the big dog, like going for a walk, a favorite toy, a treat, etc.
If the big dog approaches Michelle in an unfriendly manner, you can do the same thing; call her to you, give her a treat for obeying, and give her special attention.
They must never be together unless someone is supervising.
I am sure you were looking for a quick easy answer, but this is a difficult and possibly dangerous situation, and there is no quick easy answer. I sure wish there was; it would make my job easier! However, in my 30 years experience, aggression between 2 females that live together is one of the hardest behavior problems, and often ends in one dog being seriously hurt or rehomed or both.
At the shelter where I work, we don't let you adopt a new dog until it has been introduced to the dog you already have, and they have some time to see how they react to each other. Not all dogs are going to live together happily.
Please let me know what else I can answer or help with. I am sorry you are trying to give this bigger dog a nice new home and that it is not working out for you and your terrier.