Humping is not always about sex for dogs.
Gary Landsberg, DVM, a veterinary behaviorist in Ontario, Canada, says mounting is common play behavior in puppies, and is even normal in the play of older dogs if it’s not taken to extremes. “You’ll often see one dog mount another, then a few minutes later they’ll switch off and the other dog will mount the first dog,” Landsberg says. “It’s a common play gesture.”
My 12 year old spayed female will hump our neutered 3 year old male when they are playing together. If you don't like this behavior then you can distract him with a different toy or game. I'm not sure that he will understand why you gave him a time out. The behavior may lessen after he is neutered.
My dogs are 3 and 12 years old and still get up early on weekends.. usually 7 am. I feed them and put them out to do their business and then we all go back to bed. It works out well for us.
As far as nipping, they quickly learn that play time ends when they get too rough. I don't yell, just say "no bite" and then ignore them. When they calm down then play can resume.