I've actually been wanting to switch his substrate as well, mostly because I feel the paper towel is an eye sore, but if you think it may also improve his stress levels I'd be happy to change that soon!
His tank size is a 40 Gallon Breeder.

His below-average size has always worried me. He was small for his age when I got him, and although he's gained a lot of weight since, he's only 426.44 grams. He doesn't appear to have lost any weight since he went on his feeding strike, and has never appeared malnourished, but for the most part has always been a small, very picky eater
I have been considering downsizing my tank - if you think that would improve the situation significantly I'd be willing to do so. However, if filling it up with more items would work as well, that would be an easier option.

I've been feeding him "adult" size mice, which are about the width of his body. They're frozen-thawed, but he did originally eat live mice from the breeder.