Hey, don't worry, crates are not cruel for dogs, even if they appear to be
They're very useful tools in training. If crate training is done properly, the pup will see it as his safe place (kind of like the safe room to a cat). Dogs tend to keep their sleeping places separate from their wee/poo places so it also helps in house training. But it matters a lot how you teach crate training, because if you lock the puppy in and he seems distressed and panicky, he'll probably develop an aversion to it.
It's also very very good for preventing destructive behaviour. Many dogs get destructive when they're bored (especially when they're home alone) - search for destructive dog on google images and you'll know what I mean. Even small dogs can cause a lot of trouble, that's why crates come in handy
As for interfering, it's really your choice. If you'll leave them be they'll probably end up taking the dog to their parents (it sounds to me like you're the responsible one in the house) if they see they can't handle it. If you do help them, chances are you'll train the pup properly and he'll be a delight, but you'll be stressed taking care of two babies at the same time and battling them in regards to how it should be done.
Anyway, I wish you the best of luck no matter what path you decide to take.
ps: I also think you should have some kind of written agreement if you don't want to pay for the damage the dog does, if it does. Think about ruining an armchair or chewing the corner of a kitchen counter. Would you be ok paying for that even tho it's not your dog? If yes, forget the agreement, if not...well, you should at least bring that up for discussion.
ps2: what the heck is it with men and neutering? Most act like you want to cut their balls, not the dog's/cat's