Since this post is alive again, let me share what I decided to do with the dog yard this summer and it's going GREAT so far. Let me preface this with the following:
the front half of the yard is sloped and very wet and when it rains a great deal *this is Seattle* gets MUDDY in spots. While the back half of the dog's yard is dry and difficult to cultivate due to many years of mature shrubs and their roots. 4000 kinds of grass is growing back there because I've patched it with every grass seed patching kit in on the market. Last year, I top dressed the entire area with peat moss and chicken manure and saw some improvement. I have tried every single ground cover I can find for my area and I've not yet found one that can swim.
This year is going to be the year for an awesome doggie yard, I think. Here's what I did: top dress with composted chicken manure (no chemicals here). When it started to warm up, I planted WHITE FLOWERED CLOVER in the bare spots. I decided, if I can't have a totally green doggie yard, I'm going to have a totally green doggie MEADOW. I found clover seed by accident at Home Depot and its coming up (so far) all over out there -- even in the dry spots on the other end of the yard. My neighbor helped me chainsaw down these sickly bush trees at the dry end so now there's more area for the doggie pool too. I've been hand cutting it -- I know, crazy - with a grass clippers because the terrain is so uneven and I don't want to clip it short yet as there's too many bare spots still with baby clovers popping up.
Is it too much to ask, to have nice, soft green grass -- without mud -- for my precious angels to lounge in this summer while they play in the dog pool? I mean, seriously!

<== behind them, the Dog Yard.