Her recall needs some extensive work, but don't beat yourself up over this, these things happen, I have attached the lead to my girls tags a couple of times myself, easily done.

I'm sure that others have done that too. I'm sure you will always, double check now that it is in the correct place especially on roads, it is a mistake nothing more, your not a bad dog owner, your dog was not hit by a car, no-one was hurt, the Westie was fine, it is a one off occurance.
The worst thing anyone can do is pick up a dog, it encourages an untrained or excitable dog to jump up. She wasn't running to the Westie to fight was she? Just barking? Which is a typical terrier response.

She plays the submissive stance out on normal walks, very common for young female dogs of all breeds, so I would think she was just being yappy, and would not have bitten the Westie, only the lifting up of the dog caused her 'bad' but understandable behaviour.
It was I expect very frightening for yourself and the Westie owner but let it go now, lesson learnt, it won't happen again will it?
Keep practising with the recall, when on her long line you need to keep recalling her with a treat, she is young and at that stage where she is being rebellious, just take control of her and keep practising and practising.
I doubt that the Westie owner will complain and realised it was just a terrible accident, so stop worrying about that, everyone can forgive an accident.

I dare say it affected you more than anyone else.