Thanks for your responses!
An update on our puppy that I posted for sale - we decided to keep him and make OUR home his forever home, as originally intended.
He is a complete doll with an incredible personality. Friendly, sweet, obedient and affectionate beyond belief! He was returned to his breeder for surgery to repair the hernia and we missed him terribly. When the surgery was done, no hernia was found. I will not be returning to the vet who originally diagnosed him. He was neutered at the same time, so he will not have to go through another surgical procedure, thank goodness.
We are working with the allergy issues, and the situation has improved. I also ordered a product called Petal Cleanse that is currently only available in Europe (but will be available in the US this May or June). It is all natural and supposedly helps keep the dog allergen free. Our friends in Europe say it is amazing stuff. I'll post my findings after I use it.
Attached below is a new picture of our baby. He is now 16 weeks old and exactly 3 pounds.