Toto does that same thing .... only difference, I always have little things handy for her to "pretend dig" on! She has lots of little blankies, fleece beds, etc. and she will dig and dig until everything is "just right" and she will curl up on/in it! The funny thing that she does is always, always makes a "pillow" for her little head! We bought her a doggie pillow but she doesn't want that ... she likes to create her own!
She seldom hides things ... she will attempt to hide paper if she happens to get a little scrap but we are very careful not to leave any down where she can get her little lips on it! She is just soooo funny ... she keeps us in stitches!