One of my dachshunds is a tissue thief also! Ever since she was a puppy she has done this, and now she is almost ten and still sneaks them out of pockets. Luckily, she doesnt eat them though, she just shreds them all over the house. Strange little quirk.
Good luck with getting your dog to accept smaller kids, sounds like a good idea to try to socialise him to little kids if there will be nieces and nephews around!