I'm so sorry to hear this Leslie - I know this isn't a decision you take lightly.
I probably wouldn't use the carpet or towels either - but the whole time I was reading this thread I was thinking of the puppy wee wee pads you might be able to layer them rather thickly and then just peel them off after he uses them. I can't imagine being in the position you are in.
Another thought - what about installing a kitty door so he can go outside - and maybe another conversation with Nancy - telling him to use the outside as his potty.
I'm not sure if you have used the Yesterday's news litter or not - I imagine you have or what about buying a paper shredder and letting him pee on your credit card statements!?!? Make your own yesterday's news!

My only other suggestion is teaching him to use the toilet like the cat on "Meet the Parents!" :P