Liter boxes are good, but I wouldn't use actual 'cat liter' - instead put the pee pad inside the box. Alot of us do that. The reason not to use cat liter, is he could play with it, eat it, or bc it is so small, I have heard that little pieces of cat liter can get lodged in their privates and cause infection.
They make dog liter but I have heard the same thing, they eat it or play with it all over the place.
So placing the pads inside the box is much better. Purina also makes a special dog liter box.
As far as breeding. Your girlfriend needs to do alot of research first. Our country is inundated with back yard breeders. Ollie may be cute, but that doesn't mean he is breed worthy. Reputable breeders already have their own stud dogs, and even if you find a reputable breeder in need of a stud dog, they are gonna want back up genetic testing, want to know a complete lineage, and also tested for STDs (yup - dogs can have sexually transmitted diseases) Both males and females should be tested before any breeding takes place. So all that pre stuff is going to cost a small fortune, unless she goes the back yard breeder route
Did you know the most common genetic defects in Yorkies range from Liver Shunt to Luxating Patella and they seem to be showing up more and more. The cost to have surgery to repair is on average $4000 ~ Imagine buying a pup and getting hit with that
Tell her to put $100 every month in a box. In 9 months she will have the $900 and in the meantime she can have Ollie neutered, trained and into the happy 'pet' he truly wants to be. She will also have complete peace of mind that Ollie is her baby, and that she didn't add to mix that is already out there.