To me that still looks like the cat on top of arthur's head... I think it is connected to gowther's true nature.
The story merlin told could have many explanations at this point. The weird part is that gowther does turn into a doll when merlin uses absolute cancel on him... Which to me suggests that merlin is telling half a lie here. Imagine merlin using absolute cancel on mel.... It wouldn't turn him into an action figure (as far as we know anyways). So gowther broke his commandment, then stuff happened and he ended up being an actual doll. It is possible that the powerful mage merlin mentioned did seal the demon gowther within a doll. It is also possible that the mage in question was also merlin herself.
The doll part is closely related to Pinocchio's story, and is even related to his commandment. Remember he's supposed to be selfless?
Once there was a carpenter called Geppetto. He made a wooden puppet and called him Pinocchio. "How nice it would be if it were a real baby!" sighed when he finished painting it. That night, a good fairy heard him and made his wish to become real. "Awake, wood inanimate, now you've got a soul!" she made her magic spell touching Pinocchio with her magic wand. "Pinocchio , be always a good , brave and a selfless boy , " said the Fairy , " and one day you'll be a real boy !"
So Pinocchio ought to be good, brave and
selfless. At first he's given a wooden body,like
dolls used to have. And Gowther wants to understand emotions, which in turn would make him a
real boy.
The similarities are too great to dismiss. So I'm not really convinced that Merlin's story is as she says, that he was made by someone, a great magician. We know for a fact that he was a demon, a commandment at that, but he broke his commandment by being selfish and he got his memories wiped, and lost the ability to have emotions. So while the doll could have been made by a magician, and it would actually be a magical tool, it can't really be that Gowther was "made" by him. Maybe his soul got attached to the doll somehow, but I'm really having a hard time imagining that Merlin was unaware of what the doll was, and of course his nature. So back then she was most likely only telling half the story, as in the doll as a magical tool was made by a magician, but she would have wanted to protect Gowther, since she could know that he's a demon.Which unsurprisingly also fits with the legends, that has Merlin and Gowther being siblings.
Given her interest in the demons and the commandments in particular, it's not hard to imagine her accepting to take care of Gowther, based on the knowledge that she could have of him being a former commandment. It all fits imo.