It seems that until we can get some cross-fencing, some compromising will have to go on. The mare just thinks chasing sheep is the best game ever....the sheep don't think it's a game. So it looks like the horses will need to stay in during the day for a few hours and use the pasture at night.
The really good news is my chicken stealing rotten dogs are not the slightest bit interested in sheep-stealing. The first day we tried letting the sheep out of their smaller pen into the big pasture, I tied up the dogs. However, this didn't stop the sheep from walking right up to the dogs. No one blinked or barked or growled, and the sheep wandered away. Today, we let everyone out, no dogs tied, and everyone is very peaceful - except for the darn mare...who is reduced to looking out of the gate of her stall at everyone else.