Hi Kathy,
I love your little guy...he's adorable! However, I did want to warn you about the possibility of teaching him aggressive behavior. Waving things around in front of a bunny (anything, from a hand to toys to paper towel) and having him react by grunting, or rising up on his hind legs, or scratching at it...all are signs that he is probably upset. (To me) he is showing signs of aggression in the video - that he is royally $!#*$ at the paper towel and is fighting back at it, as it appears to him as an enemy. This could lead to more aggressive behavior down the road, and could possibly extend to aggressiveness towards other things, such as a human hand when it reaches out to him. It's kind of like having a dog who likes to be dominant with its owner; there are things that can unknowingly amplify aggressiveness in a dominant dog, such as playing tug-of-war or allowing the dog to take control by sleeping on the bed, sofa, etc.
I just wanted to mention that, as I'd hate to see you wind up having issues with your little one later on...