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I didn't read the entire thread as my phone is being really slow at loading pages so you may have addressed this already
Do you think he's stressed by being confined or being away from you? Not sure how much space you have but could you expen or crate him next to your bed? When he gets upset you'd be right there to talk to him or pet him and maybe he'd settle down and go back to sleep? You could put a tarp or something under the expen covered with pee pads just in case to protect your flooring.
I wonder if its partially a senility issue and he is more lucid during the day when he's holding it. Maybe he is disoriented at night when it's dark causing him to stress? If he's sleeping in another part of the house can you leave a light on for him? Not sure how it translates between people and dogs but my grandmother had dementia and would be much more distressed if she woke in the middle of the night. It wasn't until she could see and get her bearings that she would calm down.