Hi Laura,
I just want to encourage you and give you some ideas because I'm sure you love him and finding a new home is your last resort. We all want our dogs happy and to enjoy them and vise versa.
I'm working thru some issues with 2 1/2 male yorkie, all of which are trying such as pottytraining ( he wears a bellyband & pad ). Also aggression which started with my 2 cats and now he's scarring kids and some adults.
Otherwise he's the cutest most loveable dog to ME. So what I propose is two fold Training, I'm watching the Cesar Millan DVD'S and realize almost anything is possible with knowledge, love and patience and practice.
The next idea is if it's possible to get a cat in the house for company. My Amore' only dislikes 1 of my cats it could be worth a try.
Lastly follow your heart it won't stear you wrong.
In closing these Dog Whisperer training ideas work and I love my dog to much to let him dominate me and become abnoxious, And So I Continue To Work With Him... All furry 4 lbs. Good Luck!