At such a tiny size i would be worried about neutering him.He also may have an allergy to ansthesia so i would def find out her reasoning.Most likely he would continue to hump after a neuter although maybe not as excessive.
It would be a lot to take on if she crated him so much why does she care so much about visiting the poor little guy.It is hard to untrain circliling .
gl to you do what you feel is right in your heart this little one sounds like he is going to need a very caring home.gl to you with your decision