He can probably sit in the box, but its not big enough to do anything in. Like, he can't walk around it or lay in it. They like to be gross and lay in their litter boxes.
And is your cage still filled with bedding? Heres a refresher in litter box training!:
I agree with PaGal, once you get all the bedding out of the cage. When you have bedding everywhere, it makes them think that the whole cage is a litter box. So if you took all the bedding out except for the litter box, that would help. Then soak up the pee with a paper towel, put it in the litter box, and sweep up the poops and put them into the litter box. That will help him not be so confused about where he's supposed to go. I don't know if you have one already, but a little hand broom with dustpan is a bunny cages best friend. I got mine at Walmart for like $1.50.
Anyway, you're probably always going to deal with stray poop, its just part of bunny ownership. But if you stay really on top of cleaning the cage out and putting everything in the litter box, that will really help. Maybe enlist a kid to do it!
When I was first litter training my baby bun, the first few weeks, I didn't clean the litter box completely out. I left a little soiled litter in there, so she could still smell that was her place.
But, I think that getting him neutered would help the most with getting him litter trained.
If you do take all the bedding out, he probably won't need a ton of blankets. I think that most rabbits like to lay on hard surfaces. But fleece blankets are the best for them.