The rule of thumb is a puppy physically should be able to hold his bladder for the same number of hours as months he is old plus one. That is while awake…they can usually hold it longer while asleep; but if they wake up during the night they will usually go. Of course some can go quite as long, and some a little longer.
Personally, I don't worry too much about accidents in the crate at this age. As their bladders grow, they hold it longer. I don't like leaving a dog without water for the whole day. I may only put in a little bit, though...and refresh it more often.
I would also rather give them plenty of room and let them eliminate and then get away from it, than restrict their space and force them to be in the urine if the must go...again, at this age it is really likely that he can't hold it that long.
Usually with a puppy that age, I put them in a big crate, line the front with paper, give them a cup bed in the back, and a crock with a tiny amount of water. We usually have pee accidents in the crate if we leave them for 4-5 hours for a while...but by 1 year they all can hold it for 10 hours if they must. So, it has worked for us.
Your system sounds good, and it should be working soon. I think he is just too young. Sounds like he is spending a lot of time in his crate, though for a puppy. He is in there during the day, and at night?