Well, this is not a nice or happy message, but outdoor cats are never a good idea - they have a very short life expectancy due disease, predators, cars, dogs, human cruelty, and nuisance complaints. They are also VERY VERY devastating to local bird poplulations, particularly songbirds, which make them unpopular with neighboirs and anyone who cares about wildlife. That being said, as on owner of a young Golden Retriever and an older housecat, it's very hard to distract them from instantly available, known "prey" - it's a battle against instinct - I think it may help to let the dog get to know the cat better if possible, to try and satisfy some of the curiosity and excitement. We're still having issues, but it's a little better since he now knows her scent and who (or what) she is. An outdoor cat may just be seen as a readily available "wild" animal, so that may be tougher yet. Sounds like you're doing the right thing, though I'm certainly no expert.