should he be neutered now?

What is the purpose of breeding him?  Is he titled?  Has he been tested?  Is he an outstanding individual of the breed?  Many things should be considered before thinking of studding him once or more then once.

Has he been tested for what?
And what do you mean is he an outstanding individual of the breed? 

ShaneandMiya, it's a hard concept to understand when you first hear about heath screaning and proving you dog to be worthy to breed but it is a big factor in wearther or not to breed a dog.  Health testing involve taking him to a vet to get get him tested for Hip Displaysia and other dissorders that you do not want to pass on that are common in the breed.  Get his tested for STD and the such so you don't harm any other dog while breeding.  Then you want to make shure you don't wan to pass on behavoral issues so you need to prove that your dog can live up to it's standards so you know your producing a higher quility dog each time you breed.
 
Being a small dog you need to know a little about welping wich in small dogs is very important.  Choosing a mate is important, you don't want to breed a large stud to a small bitch.
 
My dog has sever HD because someone simply breed their dog without any health screening and now I've paid a large amount to correct a mistake from a breeder who was not responsable.  HD is the largest birth defect in dogs so at the very lest do health testing for that, it just involves simple x-ray to make shure his hips are built correctly.

Ok well thanks for all that info, but i'm not the one who will be breeding him, the people we got him from want to use him and will be taking care of everything, and they already have a bitch picked out, yadayadayada.
Anyways, what about the quesiton that I asked about? 

Breeding should only be for dogs with great conformations, outstanding disposions, etc to better the breed.  There are too many BYB and dogs that have health problems because they do not test the dogs before breeding and then there is inbreeding and just plain breeding for the wrong reasons.  I say nueter him, that may fix your problem.

I know some breeder will only sell you a dog if you sign a contract that they may use him as a stud.  It's actuly quite common that breeders do this.  There are also thoes who have a contract signed that you must nuter the dog.  I'm not shure what agreement you made with your breeder but looks like with this case it may just be best to do what the breeder is asking for.  If your dog is not the stud then they will just find a differnt stud for their bitch that they have in mind.

I think mostly just ask about what type of health screeing they do.  You do not want your dog to get an STD from whatever dog they have so at the very least ask if they test for something like that.  I've never breed a dog myself so hopefuly some breeders will come alonge to help you more than I can but just ask as many questions you think are important.
 
IMO I say if you didn't sign a contract and he is only pet quality then nuter him.  Pet quality dogs are still wonderful pets but should never be breed, to much risk of passing on bad trates that we don't need to see in the dog world.

Ok, forget that I said we were going to breed him...that has nothing to do with what I want to know.
 
The way he's acting with miya, does it seem to be because he's not neutered, or is it just behavioral/being sweet?

How old is Mia?  IF she is around 6 mo. then it could be possable she is going into heat herself and you need to keep the two seperated.

Miya is almost 6 months, but she's already spayed so that's not it.

What's the purpose of keeping Shane intact?  Unneutered dogs tend to mark and can be more agressive and proctective then those not.  The healthiest thing would be to get him fixed.  His affection towards her could turn to agression being unneutered.

he's not at all aggressive, he's the sweetest dog, and we haven't had any problems with him marking his territory, it just takes a little bit more time to take him out because he has to pee on every tree, but it's not an issue.
 
we were going to wait a while to get him neutered so we can get some other bills paid off first, although if it was the type of thing that he HAD to get done RIGHT NOW, of course we'd pay for that first.  it just hasn't been a priority with us because we don't let him around females in heat, so he's not going to knock up another dog or anything, and he hasn't shown any aggression or anything like that.

Well, I've decided I'm going to call around this week and see how much it will cost to get him fixed, and get it done soon. 

what are the benefits of a neutered dog 

One big benefit is that your dog is less likely to take off to woo a lovely female in heat that he smells a mile away (and subsiquently get lost, hit by a car or snatched for dog fighting bait).  I'm assuming that he is a chi.  The reason you should not breed him if he and the breeder's female is not an excellent example of the breed (reinforced by conformation points and titles, etc.) is that the puppies will inherit the less than than good traits from the parents.  When breeds become popular (like the Chi right now),everyone wants to jump on the bandwagon and breed even the really poor chis. That is how you end up with tons of  mean pits, german shepherds with degenerative hip displasia, aussies with eye problems, piddling and nipping cockers, nasty nervous min. poodles - you get the picture.  These dogs glut the market and ruin the breed. 

In other words, neuter your dog unless he has an amazing pedigree that is proven.  Also, since the female is coming from his breeder, is she related?  Does his breeder know what the hell she's doing?....and yes, your dog could get a sexually transmitted disease from the bitch across town if he gets loose ([linkBrucellosis[/link]>http://rds.yahoo.com/_ylt=A0geuoBhOhlFmy8Br3FXNyoA;_ylu=X3oDMTE3Mmk2OGVqBGNvbG8DZQRsA1dTMQRwb3MDMQRzZWMDc3IEdnRpZANZUzExMl85Nw--/SIG=12gon5m1o/EXP=1159367649/**http%3a//www.cdc.gov/ncidod/dbmd/diseaseinfo/brucellosis_g.htm]Brucellosis[/link] -look it up.  It can be fatal).

As long as he isn't humping your female, his behavior is probably just social interaction.  As long is it doesn't turn violent, I would let them interact.