As far as knowing the difference between rugs and pads, it is just training and location. We've only had ONE accident on a throw rug and that was because I was dumb enough to put a throw rug down right next to the potty pad.
No other accidents on throw rugs after I thumped myself in the head for that.
My older Shih Tzu has the run of the house all the time. He is 11. Coby is 1 year old and has free reign of two big rooms and two stairways. We are still in the process of enlarging his freedom. But that can only be done when we are 100% focused on watching him 100% of the time in the new rooms. My mom has been very ill for a few months, so we haven't had the needed focus. We simply avoid failure by not giving him the chance to make mistakes. That way, Coby is ALWAYS SUCCESSFUL!!
Although we spent most of our time in the kitchen, I totally remember the frustration of sitting in the living room watching tv and having Coby in the kitchen (full view but separated by a doggy fence). How I longed to have him lay in my lap while I watched tv. I was soooo excited when I finally got that!!
Patience, patience patience. It will pay off.