There is absolutely nothing wrong with caging as long as it isn't 24/7. I've found, in the past that spending too much time with new born - 12 month old dogs they end up getting too attached. She needs to be left alone for periods of time otherwise you could have hell to pay when she gets older and you aren't about.
Although the Bichon Frize is, in my opinion, a lap dog, they still like to spend time on their own. Just keep at it and occasionally go and check on her - try to do this when she isn't whining though otherwise she will associate whining and barking with you running to her attention.