I figured it out! I put more barriers up around our new buns cage. So that when one is out they can still see each other but not inflict harm. The towel thing freaked both of them out. Since Domino is used to being out we have been letting him out first, he generally runs upstairs, then we put a gate up and let Chess out. So now they are both getting their time out. One problem with the bathtub and giant buns is that they can get out of a normal one. I think we are going to try my huge one - Lol
Chess is starting to come out of his shell, so to speak. He allows me to pet him and does mad racing around the house when he is out, yesterday he started eating from my hand. He and Domino are not taunting each other as much either. We are making progress. I have also discovered that Chess likes laundry baskets filled with clothes. He loves to jump in them and burrow. Domino does not seem to care for window & door boxes, but I have a feeling Chess might.
Thank you for the wonderful suggestions, especially putting a little bit of hay in the treat ball.