
I think it may well be that once castrated, the young dog will 'know' and could start picking on Dog 1. You could try the chemical castration option but that may not give you the true picture.
If they are getting on okay right now, why not leave the status quo, and continue to confine both dogs when you have bitches in season around.
To be honest, I'm not one for castrating males, other than for medical need. I do spay, when my bitches are retired, and in that, perhaps spaying your retired bitches would be much better than putting either of your dogs through what is surgery, even if not invasive.
Regardless of the relationship between your two males, when I had to have a couple of our oldies castrated (prostate flare-ups) I bitterly regretted it - both went very 'soft', lost any zip they'd had, tended to put on weight unless carefully watched, and grew thicker coats.
ps In any case, castrated dogs may well still mount and even tie with a bitch in standing heat. Even if they'd not be able to sire litters - it could still be a source of competition between your two boys.