My friend gave me her crate...

Training begins, he has to sleep in there tonight, not sure whether to put it upstairs or keep it downstairs. I think downstairs might be a huge shock for him, and I might need to do it gradually,

To start with suggest you put his favourite blanket or bed in it, then encourage him in with treats and leave the door open. Let him go in and out for a time with treats so he is not scared.

I never did have crate upstairs but a lot do just to start with, yes something familar and stuffed frozen kong.   

We've put it upstairs because he's having issues with his confidence right now, I don't want him to be shocked into it and end up going backwards,

I never crate trained but this may help   

http://staffy-bull-terrier.com/crate_training

I put him in there and he started breathing really fast and stressing out, I took him out and let him settle under the bed, I need to encourage him to go in there

Let him walk in there himself with trails of cheese, he was a bit reluctant, but he went in, and he sat in his bed, he lied down for me in his bed and then I sat up and gave him cheese, then closed the door, with cheese, and now he's lying down in there. He's breathing a little bit fast but not as bad as before, I'm gonna do this every night I think.

Leave some treats and nice things in there for him during the day too! So he may come across them and just go in by himself. It would be good for him to be able to go in and out without having to be shut in too to build his confidence before you start shutting him in.