Never had squirrel gravy, have had squirrel and rice. My kids would never eat biscuits at my parents when they were little because my father always called them cathead biscuits and they thought they were made of real cat heads!
I can imagine the term coming about from somebody saying "them biscuits are big as cat heads". It just means a big thick biscuit.
When my mom baked biscuits she would roll and cut them and then take the scraps and make another dough ball and roll and cut them again. The scraps from the second rolling she would just gather together and make a big rough biscuit by hand and bake it with the "good ones". That was the cathead biscuit. : )