Use an airlock...it's doing the same thing as your towel idea, but it's doing so without allowing bacteria inside the fermentor. With a towel, you'd have airflow going both in and out of the fermentor and that's not good.
As far as headspace...you'll be fine with a 6 gallon BB.
He who drinks beer sleeps well. He who sleeps well cannot sin. He who does not sin goes to heaven.
Another HERMS rig...