I agree with the learning curve thought. Also how long are you leaving the dog? Are you giving it plenty of opportunity to do their duties where they are supposed to? I want to say do NOT put anything in the crate. Dogs can figure out how to pee and push what ever (paper, bedding) in the pee to "wipe it up" so to speak. My dogs don't get crate pads until they are consistently holding it in the crate. Making the space smaller would help the dog notify you when it needs to go, dogs do not like to go in their beds.
That being said, my dearly departed Maxine had HORRIBLE crate going issues. For us it was training that stopped the problem. It wasn't she was not trained (she was BORN trained) but by taking her to classes gave her confidence in her self. Before classes, on weekends when we were home all day she was perfect, ask to go out, no accidents etc. Put her in the crate for as little as 15 min, and she would have pooped and pee'd in it. She HATED her crate. We couldn't trust her out of the crate (she was over a year old) because she kept having accidents in her crate. After one session in obedience, she started holding her "issues" and we could FINALLY put the crate away.
Proper exercise, training and smaller area, hopefully your pup will get better very quickly.