Yes, he does seem to think he is sitting on an egg. You didn’t mention how long this has been going on, but if it has been longer than a month, I think it would be a good idea to take the item away. He clearly wants to nest – he is certainly mature enough – and probably it was just the right circumstances of his hormones being active when you gave him this. It’s OK to humor him for a short time – I mentioned a month due to this being about the incubation period for eggs. But this can become obsessive and turn into a more serious behavioral problem. Get him away from his cage with treats or food and remove the item when he can’t see you. You should also take away any paper or anything else he is using to make a nest. Moving the toys around and even moving his cage to another part of the room can also help break this cycle.
I would also recommend modifying how you handle him, because you are probably stimulating his hormones without meaning to. It is easy to cuddle with a cockatoo because they can be so cuddly. But as they get older, the hormones take over and it can lead to severe aggression in a male and excessive egg laying in a female. Try to limit petting to his head and stop petting him under the wings and anywhere around his tail. This is contact that only his mate would have with him, and as a precursor to mating. When we pet them this way, it leads to a lot of frustration for the bird. If you feed a lot of fresh foods, you might cut back on those for the time being, only offering them a couple of times a week. An abundance of foods can also encourage nesting behavior.
Thank you for asking Lafeber,