I always though the secret to squirrel was low and slow. My favorite way to cook it is to quarter it and wrap in bacon. Throw on the grill for about 45 minutes to an hour and then coat in your favorite bbq sauce and cook another 15 minutes. At this point you can eat it. If you think it is still too tough, wrap in foil and bake another 30 minutes to an hour in an oven at 350 degrees.
The best fried squirrel I had was fried in flour and spices and the a gravey was made and poured over the squirrel. It was then baked in an oven for an hour at 350 degrees.