By digging and nipping he is telling you he wants attention. The easiest way to discourage escalation is to respond only to light taps (with scritches) and to the painful stuff with a violent leg twitch. Don't hit your rabbit, but the sudden movement will startle him and he'll back off for a bit.
Rabbit's need at least two-four hours of out-of-cage time. Could you set up a pen for him to race around in? A cage without space isn't really a good substitute for exercise.
Bunnies usually aren't that cuddly and sometimes not friendly either. For my Hammurabi I usually give him a detailed rub/pet/scritch session and always give him a pet when he asks for attention. This teaches him that I bring good things and he'll want to be near me more.
Hope I helped ^^
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