Well said, Caledonail. People who have no phobias often have no idea how paralysing a phobia can be. One of my brothers has a phobia about bees and wasps. If one comes into a room where he is he freezes and whispers "Get it out!"
What your OH needs to understand, minxie, is the definition of phobia: it is an irrational fear, a terror that you cannot be reasoned out of. It doesn't sound as if he really gets that.
If his parents have said they'll put the dog in a cage, perhaps you should give the visit a go and even be apologetic about your phobia, saying that your fear is not under your control, it's irrational by definition.
I'm sorry it's stressing you out so much. I don't know what treatment there is but your GP might be able to help.
Let us know how it goes, or doesn't go!