I've trained and worked with a variety of dogs, including protection-trained dogs, but everyone has their own opinion. IMHO -

1) If your goal is to protect your dog, picking him up was in fact the correct thing to do. He's 10#. You probably didn't get off-balance, etc. You also disrupt the "body language" messages he gave or is likely to give that would increase the liklihood of an attack. Don't worry about him barking and snarling: an attacking dog is WATCHING the body language, not listening!

2)If legal..pepper spray. Better yet, Bear Spray. For several reasons: you can use it one-handed and still hold your dog; it is non-lethal so you WILL use it (as opposed to a club or knife... with which you will hesitate); and if the other dog's owner is a jerk, you don't have to stop with spraying the dog.

3)With a walking stick or a knife (which I would consider a last resort for your situation) you need to drop your dog and really (really, really, really) attack the other dog. No bluff. Once you engage to THAT degree, you're at greater risk if you are ineffective. Really, Christina.. a last resort.