Gary, you need to get a toy squirrel with real squirrel scent. He won't release because he sees it as HIS squirrel. It's competitive to him. You need to keep your cool and let him release. Get a check chord and bring right to your side. (heal command) Congratulate and praise him anytime he releases the toy. Make him want to relase because he will see how happy it makes you!
My lab will drop a duck/toy on the command of "drop" everytime. My Chesapeake will do the same with "thank you". This is how I have trained my bird dogs, so I hope it helps.
