Oh, Barbi, how distressing this must be for you. I think your assessment of the situation sounds "right on". They have obviously not bonded. Sounds like Baby is very lonely to me. Of course, I am a bit sympathetic to the owner with the escaping dog. I'd be horrified.
I can't help, but I'll sure say a prayer that it all gets worked out. I'm sure the perfect home is out there. Is there a Chihuahua rescue? Certainly there is somewhere. Maybe they could take him and find the right people to raise him. Good luck.
Logan