Is this a behavior problem, or material problem? Do I need to change what I line the crate with? Or is she misbehaving? She's not in the crate, most of the time. I put her in there when I take a shower, or go out to the store. Then she tears the towels to shreds!
It sounds like your dog is bored, and ripping up the towels is a fun way to pass the time. You can probably take the towels out, and let her lay on the crate pan. I doubt the towel adds much in the way of comfort of warmth. Either way, even if you only put her in there while you take a shower or do another equally short activity, put a toy or Kong filled with treats in there with her.
The issue is that you put your dog in the crate and then leave. The dog now associates being in the crate with separation, and now you get the anxiety being expressed as destruction.
Crates should be a positive place for the dog to be - it's their space to feel comfortable and safe.
There's plenty of reading to be had on crating dogs, but start with crating your dog earlier and staying around until she's comfortable and relaxed, at which point you can leave without any fuss.