Well, I think your current idea has a decent chance of working.
If not, I'd start with a leather cap base - a lot like an aviator cap. Something nice and soft inside for comfort, and attach the support to the leather. This might work with your current idea for comfort and stability, too.
I would not bother with the clay. I don't think it would be very comfortable nor strong enough - and too delicate.
Have you made the tentacles yet ? I'd try to make them as lightweight as possible.
Ideally, I think this would be moulded out of latex and connected to a cap like above with wire (or mechanical !) support in the tentacles themselves but that's a huge pain.
You could do it with painted fabric over wires or foam covered with fabric/etc. You could even make it all out of Wonderflex over a cap, but I'm not sure how much that would weight.
You could even make it totally out of leather - cut to shape and supported with wiring.
A cool idea would be to use sheer fabric or latex pieces to blend the head-piece to the skin.
Actually in the pipes:
- Remaking Ser Loras doublet.
- Luke Skywalker, A New Hope
- Wind Waker starter costume in swim material
Eventually: Paul from Dune, Faramir, Harry Sullivan