Dogs definitely need a boost, that much I can agree with. How much HP do they have? 14? 28? Something around that? "Wild Dog" and "Wolves" encounters are all around better than these dogs you can buy at Junktown, and the ones in Klamath are even crappier, but even the wild encounter dogs are easily killed with one shot or punch.
I think HP needs to be boosted and damage should be boosted. I like the PE suggestion too; they could actually act as a guard dog and start to run after a person before you even see them, giving you that extra little...
hand paw

Never the less, dogs really shouldn't be anything "PvP-worthy". The way I look at it, it could be a helping hand to a low-level newbie, but even if that is the use for it, it still needs to be boosted. A dog shouldn't be able to get killed by a puny scorpion.