Beanie,
It's not cruel to crate a dog at night....especially puppies. It's just a bed to them. Yes, you're restricting them, but then again, a crib does the same for a baby. Keeps them safe & in a confined area.
Personally, I sleep better knowing that my dog doesn't have the chance to wander & get into trouble. My terrier loves to explore for food & stuff while I"m asleep. Right now, I have a baby gate across my bedroom door at night to keep my two with me, but I can hear the rest of the house. They're adult dogs..but more nocturnal than I am :D
He might have trouble deciding to wake you up to be let out (My Cocker mix is like that-- lil ms shy jr). If he's crated, he'll probably cry in the middle of the night to be let out. He won't go potty in his bed unless he's ill. Get up, let him out, quietly praise him, put him back to bed, & you go to sleep unworried that there are more messes waiting for you in the morning.
Also watch the water amount that he gets before he goes to bed. When mine were puppies, I usually stopped allowing access to water about 90 minutes before bedtime.
There are other reasons for tinkling & I'm sure others will bring up other ideas. But rest easy on crating being cruel punishment. Just think of it as a dog's playpen. :D
toodles