I have a bunch of pieces of
unreal lambskin matting that I usually use if my dogs need to be kenneled or otherwise confined- they're super plush and very soft to lay on, and easy to wash if anything bad happens or they eventually start to smell like dog. Then because my dogs like to burrow into a blanket, I just pile a "throw" size blanket (50" x 60"?) on that for them to do whatever with, doesn't matter what type.
If your puppy is chewing his bedding, I would not leave them anything in the kennel he might chew. You could try a
kuranda type bed for comfort without risk of it being ingested if he's spending a good amount of time in the kennel. If he's just in it briefly, I wouldn't put anything in it when you can't supervise to make sure he isn't chewing. Dogs can get intestinal blockages from ingesting fabric, so if he's doing that, I would avoid letting him have access until he's past the destroying stage.