It is a dangerous and important situation for everyone. In my opinion, separate the cat from the environment. However the expert Konrad Lorenz says that they will get used to each other over time. (He calls this as "peace within the castle" )
Yes, I have had many cat/dog situations over the years, without anything near a tragic result. The cat enjoys taunting the dog and then either taking a swipe at her or running away. I'm not sure if it's a game or not, so I don't leave them together unsupervised. This same cat and our older dog grew up together, and the way they played with each other looked scary, but they both enjoyed it.
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