Personally I find this very disturbing. It is very hard for me to see this and not image it being my own baby's head that is stuffed and mounted.
Regardless, he will have to take it off because it IS against ebay policy:
Animal pelts and skins: Animal parts, including pelts and skins from endangered species (such as leopards, tigers, cheetahs, jaguars, sable antelopes, mountain zebras, and Hartmann mountain zebras) may not be sold in interstate commerce and therefore are not permitted on eBay. Animal pelts and skins from non-endangered species (for example, non-protected species of zebras, coyotes) may generally be listed on eBay, if not in violation of the seller's specific state laws. However, because prohibited by federal law, no sales of any item that contains cat or dog fur will be allowed. http://pages.ebay.com/help/policies/wildlife.html
The best way to report this is to scroll to the bottom of the link I posted above and click "Report listing violations". This will report the listing as being a violation of this specific policy.