Yes, his name really changes to Psycho after his first dialogue when you select the 'Yeah' option. Check it out in the game.

I`ve realised that there`s something wrong with this translated (default) message. So, I`ll try to make it clearer:

"In my house, there are like 256 cats, yeah."
Although, F.H didn`t have any snow that have caused the cats to stay indoor, so perhaps this story acts as a metaphor for something else. F.H is known for peace and have hatred of violence.

The islanders become a bit afraid when G-Soldiers taunt them. Cats become afraid of them as well, so the cats went and stay in-door. The cats have the same feelings as the one from the novel; hating something so they decide to stay.

As for the Psycho bit. When G-Soldiers destroyed parts of F.H`s property, the islanders probably will get mad, even madder because of the "violence doesn`t resolve anything" line that they always have believed in for the past years.