Great graphics!
I think that for the engine I will go with electric charges, so the sheep will be attracted and scared by various 'charges' and will move according to the sum of the vectors. This way they will be moving towards the point of local highest potential.
Having that, it should be simple to incorporate all the proposed solutions, i.e. accelerometers, touch control, running dog control, different species etc.

Comments about this, before I get to work?