Try some BT. About a week ago I also noticed small caterpillars on the squash as well as the gourds I am growing. One application of BT took care of them. Several of the gourds have surface scars but still seem to be growing. It may make for interesting patterns on them after they are dry.

Please excuse my ignorance, but what is BT?

BT is an abreviation for Bacillus thuringiensis. There are several different strains of BT. One strain causes caterpillers to stop eating. As far as I know it is 100% approved for organic gardens, but please do some additional reasearch to confirm this if you are growing organically. Google or Yahoo should provide lots of information. It has worked on every kind of caterpillar that I have had to use it on. And it is targeted to only caterpillars so it will not harm beneficials or earthworms. I buy it in concentrated form from HD or Lowes under the name of "Caterpiller Killer" by Safer Brand. You can probably also find it in the garden sections of WalMart, K-Mart or Target. I dilute 50% with water and use a hose end sprayer set at 6 oz per gallon and spray it on the foliage. Try to get the undersides of the leaves as much as possible; and you will have to re-apply after a rain. I have never had to apply it more than one time. It goes bad pretty quickly if you only use part of a bottle. You minght try putting any excess in the fridge to prevent that. I have never done that but will give it a try next time I get a chance.