This is quite the mystery! I'm so curious to know too why the barking suddenly started. I feel like something very very small and undetectable must have happened...
* Have you tried to wash the bedding in his little house / crate? I wonder if the cats went into his crate so he is barking / mad that his bedding has cat-smell?
* Does he bark when he goes into the crate during the day?
* Is there something like a reflection that he sees from where his crate is? I know my dogs will bark when they see something moving in the reflection of glass or mirror. Maybe Butch sees a reflection of the cat moving around at night?
* Have you tried to cover up the crate so he can't see out?
* If the crate door is closed, would it help if you placed the crate up on a chair so it's at eye-level to your bed so he can see you guys?
Can you tell I'm excited to find a solution to solve this? hahaa.. I like puzzles & problem solving..hehe...