Hi everyone!
The past 2 nights haven't been too bad! No fighting, just a minor growl by the Terrier to inform baby Yorkie of his presence and sleeping position. The Yorkie actually turned on his back and surrendered! YES!
I've reduced the affection towards the puppy and I agree with "CouversMom" that he is mistaking this behavior as his superiority in the pack. It seems to be working and in a very short time I see results.
Thanks everyone!