I feel mean when I put my puppy in a crate and let the older dog run loose. Should I put the crate closer to the other dog?

We bought a Mini Dauschand puppy when she was 8 weeks. I also have a standard who is 11 and is not doing so well with her health. We got her about 5 weeks ago. Her living arrangements were very clean and they were well looked after. I did try to crate train her, but I gave up. I wish I would have read your site in the beginning!! Anyways, I messed up! She did pee in her crate and whined constantly, so of course I took the easy way out and put her in bed with my other dog. My older dog we got at 6 months and have never had a problem with her toilet training. The puppy settled at night, but she keeps peeing a pooing in the bed that they sleep in. I have put paper down and sometimes that's hit or miss! I have let her run around the house, with doors closed where I don't want her to go, because my other dog does. My older dog is very quiet and is well behaved, so I thought it would be a good idea for the puppy to see her behaviors and learn from her. I know that sounds stupid now. Anyways, my question is, is it too late to go back now? Should I start putting her back in the crate? My other dog was trained in the crate when we first got her at 6 months, but we took her out at about a year. I feel mean letting my older dog sleep in her bed and have \the puppy in the crate! Should I put the crate by the older dogs bed? They have been sleeping together for the past 4 1/2 weeks. I need to get control of this before it controls me! Also, is it alright to hold the puppy while we are watching TV or like right now, I have her on my lap.? She can't be in the crate all the time. If you could get back to me I'd be very grateful! I don't want my poor dog screwed up because of my stupid mistakes!

Thanks!
Jill