Simply put, the Cat Head hat will not show up if you’re in a lobby. I tried equipping a different hat, and that one showed up just fine. I can’t confirm if this is not working all the time, although I did try this on two different lobbies and the Cat Head still refuses to show up when equipped.
Here is a screenshot showing it doesn’t work (as you can see I got it equipped in the menu): http://steamcommunity.com/id/greencorn/screenshot/504776857037255839