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Blug... 
I guess if he came from the humane society he’s de-sexed. Dogs that are intact will show all the agression and difficulties with house training you’ve got. If he’s not, well off the the gonads!
I know from the smallest dog I’ve owned (a miniture foxy) that the smaller they are the more agressive they are, especially to other (bigger) dogs. She was the only dog I ever owned they drew blood.
I know all the experts advise is the same advice you’d give to a mother of a two-year-old child. Praise the good stuff, shun the bad (that is not allowed to be with the pack if you act like that, time outs, no laptime or pats while being bad) and set good boundaries that you stick you. Good philosophy, how you apply it is up to you.
I really suggest finding out what your dog loves, a particular scratch, attention (pats and hugs) food etc. Both my current dogs are completely different is that respect, one is food centred and the other is attention centred. Give your fella what he loves best when he’s good. Again, the two-year-old bribery trick.
Tough break with the health concerns. My current 13 year old Border-Collie has ‘stinky ear’ which is just a silly name for allergies. Probably grass. Not too long ago the allergies were bad, her skin was red and blistered, she was listless and grouchy. The vet put her on cortizone, and though not ideal (cortizone is not good over time as you may know), she lively and happy, full of energy. I hope the doctor can really help you with the diabetes.
He’s a blind dog, who doesn’t feel well who’s fear instinct are well honed with abuse. He’s always going to be a snappy one, that’s all he’s got going for him. Like an old man, he’s weak and he knows it so he lashes out. I guess he knows the smell of a young man as a bad thing (previous abuser?), your grandson always needs to be seen as the good guy. The one with the treats and the soft voice but the Jack Russels know how to hold a grudge, he’ll probably never be a favourite.
I love Jack Russells, they have the spirit and energy of a 8 or 10 year old kid (probably why they get on so well with kids of that age). The experts always say we never walk our dogs enough. How you would do that with all the rest I have no idea ( and how much walking could a diabetic dog do anyway?). If you did walk him maybe before that awful food so he’s either too tired or too hungry to worry too much what the others are up to.
You have a serious challenge with your little fella and I wish you luck. Here’s a site that might have a few ideas. Be warned, Cesar would love you to buy this videos, but the help link and tip section is at the bottom of the page:
Cesar Millan’s site: http://www.cesarsway.com/
Also, check back with the shelter you go him from. They should have an animal behaviourist on staff who may have some tips.
In the end, sometimes what we want is not what the dog wants. I wanted a labrador, my border-collie told me very clearly that a labrador was not a dog she was happy to live with, but the Welsh Sheepdog in the corner was someone she’s like to get to know. And so I don’t have a labrador but I do have a peaceful house (most of the time). Three other dogs and five cats may just be too much for this guy. That is a tough call for you. I wish you luck with it.
Wish I had read your blog earlier. I recently adopted a Jack Russell/Chihuaua mix from my local Humane Society. I now know that both breeds come with some difficulties. I am having a hard time potty training him (he is 4.6 yrs), and he snaps at my grandson (20yrs old). But I will certainly keep him and keep working with him. He is a special needs dog who has been abused, is mostly blind and has diabetes. I have to give him insulin shots twice a day which of course, he hates. I have three other rescued dogs, five rescued cats and twelve birds. He is doing well with all of them but is food aggressive, which I don’t blame him for because he is on a special diet (probably tastes like cardboard). So, long story short, I got MYSELF in a pickle because I’ll have to work this out. Poor guy, but I now know that I must be firm with him and not let him run the show. Any suggestions as to reprimanding him? I don’t hit, just say “no” but perhaps more assertively from now on. I think his potty mistakes will lessen as his blood sugars decrease (the vet and I are still working on the proper dose for him). If you have any suggestions I’d be grateful for the help. He should have many years in front of him and I want them to be happy for him and us.
Thanks, Sherry