My papillon puppy is nearly 5 months old. We've been crate-training over a month now & woodstock still won't hold his potty (& sometimes his poop!). He's never in the crate more than 4 hrs at a time & will go outside before being crated. On several occasions, we've been gone less than 2 hours & he will potty in his crate. I've reduced the space he has in the crate, but he still pees on the bedding. When I've taken the blanket out, he peed & pooped & made a nasty mess for momma to clean up inside the crate & on himself. I'm at my wit's end. I'm sick of washing his laundry & cleaning up pee/poo daily on my lunch breaks. The kicker is he sleeps with us 8-10 hours at a time without any need to relieve himself. & he's very good about heading to the back door when he wants to go outside when not crated. What is it about the crate that makes him not want to hold it? Separation anxiety? If so, how do I fix it?

it is a simple answer. The crate that you are using is to big. To your puppy,the crate is his den and most people try to give the dog the biggest space available.Do not do this because the puppy will start dividing up his free space. I know that you said that you cut his space back already but cut it a little more. Go to wal'mart and get the cups for food and war=ter that screw onto the door and then but ina pillow with a blanket on top.be sure that there is no hard ground,like the bottom of the crate, for the puppy to stand on.if he pee's on the pillow it will sit in there and make him unconferatble. He will learn one way or the other. In extreme cases you can go to a pet store and by doggie diapers. These work great even if you do have to put a muzzle on him.

I don't think the problem is that the crate is too big. I wouldn't leave a dog cooped up in a small crate for 4 hours.
My opinion is that he is doing it out of spite, a lot of dogs will potty in their crate if they are angry/upset with you for leaving them.
Do you have newspaper in half the crate to he can go on that instead of his bed?
Do you leave toys in the crate to keep him amused?