H.D.
I read through some of the posts and agree with Marda--keeping things as separate as possible can really help. Some practical tactics: sitting in between the boys as you read books they both enjoy; giving your son 'special' space when the other child comes over (this is the time to debut some fresh playdoh at the table while the little one plays on the floor); setting up the pack-n-play in a corner of the room for when you need to be out of the room for a minute (Put the older one in, or the the younger and take the older with you...it's amazing how they can throw lots of stuff in); use the Pack-n-play as a playspace when you can see that it's a critical time when space is needed--Have a special toy(s) that is 'only' used in there.
I understand from similar experiences that this is growth for everyone. Not pleasant, but completely 'normal'.
I also noticed several questions from posters which suggested that the children's needs were atypical in some way. Please know that there is nothing wrong with your son for wanting hugs--many kids communicate in that way and love physical touch. Nor is there anything unusual about the child you are providing care for. As a nanny, I've seen all sorts of kids and this doesn't sound like "danger" or "Needs intervention" on either side. It is always difficult to provide care for two such little ones who are so close in age, and even more so when they appear to have different goals.
I hope you can find some happier middle ground--it's going to be much easier come springtime when we can go outside and rediscover all the potential for space and play that being out of doors has to offer.