He even looks sad. Its going to take awhile for him to feel safe and loved. It sounds like he's been abused and neglected for quite a while now. I had one, Sassy, she was a great dog and a family friend. They are bread in Tibet for watch dogs, nothing got by on her. Give him time, at least he doesn't have bad habits to break. It took me a long time to train both of my small dogs, I now have an Eskimo Husky. She has never heart my cat either but still 5 years after I got her as a pup she will still run after my cat, who is alot older just to pick on her. She learned early on not to make contact, one scratch on the nose and most dogs know not to push it too far. I think yours has learned to live and sleep in fear so when he's startled out of his sleep he may at first think he has to protect himself. That too will be better with time and love he'll be able to sleep without fear. Someone stold my little Sassy, we all miss her very much. In the summer we always kept her fur cut short because she loved to go under the house and roll in the grass and was always a mess. Good luck and keep up the love.