Take a deep breath and know that it gets better.. it has to get better right???? with my guys Bugz was great with litter training he got it down pat ASAP even before he has his special trip to the vets. When I added Anya it all went to hell, but after her op both of them where back to being good, not great but really manageable. Now I have rufus and well it is all out warfare! i mean come on how can one rabbit physically poop that much! But with time and hopefully a bond it will get better. So know that he will get better.
As for how old they can be, most people do it around 5 months. It really depends on your vet, my rabbit vet will do it earlier if the rabbit weighs enough but she is just a rabbit vet she does nothing else so I would trust her, with general vets you are better to try and wait till everything has dropped that way they can do an exteral neuter rather then cutting him open to go hunting for them.
As for eating hay that is peed on, well they will do this no matter what you do. You can try a hay rack that sits near his litter tray, this is what I have done, that way he can sit in his litter tray and do his business but still have access to a fresh source of hay. My guys love hanging out in their trays eating form the hay rack.