Why does my cat paw at my sheets?

Does he dig-dig or does it look like he's kneading the sheets? If it's the latter, it's an artifact of when he was a kitten. Kittens knead their mommy's breasts to get the milk going, and some grown up cats do the same when they're very content. Just let him do that if it isn't making you uncomfortable.

My cat does this on my floor too. I think it's not something to worry about, their instincts tell them to dig even if it's not possible/useful. Just let them do their stuff.

If it's ruining furniture/making you uncomfortable then you can always train your cat not to do that with negative reinforcements.

My cat goes hard core with the clawing/digging under me while I’m in bed. I personally believe it’s his way of saying, “Move the eff over, you’re in MY spot.” Because when I do move, he plops on down and is perfectly content on sitting there.

Your instance could be FAR different but, it’s a theory

I've decided the dig-dig motions are to get my arm out from under so she can rub her face on my hand. Also lately she does this when wants to get under the blanket—after 18 years—and lie beside me for a few minutes, get some strokes, then leave there and lie beside my pillow.

My kitten was recently doing the dig-dig action that he usually does in the litter box, but on the bed for me as well. I was concerned that he thought my bed was a litter box, so I grabbed and placed him in the actual litter box. Turns out he needed to poop.

IIRC, there are scent glands between a cat's fingers.

Usually it's said that a cat's kneading is a reminiscence of a kitten behavior and scratching would be just territorial marking. After the discovery of exocrine interdigital scent glands - again, if I remember correctly - it's hypothesized that the cat is leaving his scent not that differently than if they were rubbing their face on you/the sheet/the sofa.