However from what I have read, moderate Muslims say it is not forbidden to touch a dog or have a dog, but they should wash any body part after touching a dog, and consider it unsanitary to have a dog in the house. It is more of a ritual of purification after being licked by a dog, being considered unclean but not prohibited.
Islamic websites claim there is no condemnation of dogs in the Quran, as from one site:
It is traditional among Muslims all over the world to regard the dog as a dirty animal that when touched would void your wudu (ablution) and give you nagasah (dirty impurity!
Sadly, this concept comes from fabricated hadith which claims that the prophet ordered the killing of dogs and gave numerous hadith that prohibit the keeping of dogs except for hunting and guarding, due to their dirty status!
However, by studying the Quran we find no such claims. Nowhere in the Quran are dogs prohibited. Consequently, we must dismiss all these hadith that fabricate lies against the Prophet.
A true and faithful Moslem, then, would put away such beliefs and leave the doggone dogs alone.