I have just started working on lay down with Lucy. I sit on the floor with one leg bent creating an arch, and then lour Lucy under my leg so she has to lay down then treat. We have gotten this part great. She gets the idea that she needs to go under my knee, which causes her to lay down to get her treat. That is great and all, but how do I transition her from going under my knee to actually laying down on the command of "lay down". I know we've just started, but I am looking ahead trying to figure how the heck I am going to get her to make the transition in thinking (well, obeying). If anyone has any suggestions please let me know.

I started out using one hand with the treat, and lowering it to the floor in front of my Lucy and telling her "down", and with my other hand would apply just enough pressure to 'remind' her that's what she was supposed to do.  This was the hardest thing to get through to her---she doesn't much care for the laying down comand!

Congrats on learning a new command, it usually doesn't take these dogs long to learn a new trick.
The PetSmart trainer was really impressed with Dottie during our training sessions. She would ask "Have we tried with her yet?", and we would answer "No". So she would start working with her on the new command, after a couple of tries Dottie would take right to it.

The trainer thought that we were being "proud parents" when we told her that Dottie was VERY smart. After a couple of sessions she told us, "WOW! You guys weren't joking about how smart she is".