What finally worked with my daughter (at 3 1/2) was letting her run around naked. The special "silly car" underwear was one treat for peeing in the potty. I also did a star chart. She got a star for EVERY time she peed or pooped. She then put it on the chart HERSELF (very important) Even when she started working the system (oh, I have to pee again.... then one drop comes out)I still gave the star. I ALSO gave up ONE M&M (yes, it IS enough)every time she went. And if she went POO, she got 2. And to add to that, every time she filled up 7 boxes on star chart (make it as a multi line grid) she got a lollypop.
It worked. It only took a week and a half of cleaning up pee (when she was naked) Tough week but then its all Potty. It's been 2 mos. She only occasionally has accidents at night. She pees every time in the potty and I am working on getting her to use ONLY the big potty (which she uses 20% of the time now)
Stick with the positive. Your child WANTS to do it. He probably just doesnt "get" that the feeling of needing to pee is connected to going to the potty. That's why I did the naked thing. It brought it right to her attention when she was peeing in her pants and down her leg.
Sounds like you are being very patient and taking the right approach, very caring. It will happen. Try to stay with a relaxed attitude about it. Good luck!
OH MY GOSH, I FORGOT! Buy him a potty book and movie that go together. Mine is "The Potty Movie For Girls" I bet if you searched the net, they probably made one for Boys. Oh, and d my daughter still watches it! and is watching it RIGHT NOW in fact. The main character has become HER potty buddy and she wants to go just like her. Too bad the character doesn't have another movie where she is done with the little potty and moves onto the big one exclusively LOL. It's a great way for the kid to see another kid going potty, identify with them, make "friends" and copy them.