Why do cats knead blankets and such?

it's instinctive behavior ociated with being comfortable and settling down. When they are kittens they knead their mother's udders to make the milk flow. You see the same sort of behavior in calves, but they punch their mother's bag with their noses to bring the milk down. If they're doing that, they are very comfortable. If they are comfortable enough, they may even do it to you. Good luck!