As far as letting Bacio be free when you are cooking or whatever, I would recommend you leash him to you when you are in the house. That way, he can be with you but he can't sneak off to have an accident.
Although rethinking that, i am not sure while you are cooking is a good idea...hot pans, boiling water, little puppy underfoot, etc. But, it is a good suggestion otherwise, I think. I don't believe it crating a dog all day when you are in the house as well, it wouldn't help with his socialization, imo.
I think it is great you are trying different things with him, rather than just straight re-homing. Pugs are so loyal and sweet...just really stubborn. The first year can be really tough with them and I can see you not realizing that if your other pug came to you at a year old. They are smart little dogs though...they just want to do things their way.
I can't give you any advice about bringing him into your room...ours sleep on (or rather IN) our bed.