My tortoise had its head half in its neck. But had its legs and arms out. I think it was sleeping because its eyes where closed however its head was slowly bobbing up and down.
LOL! "Half in its neck" that really had me wondering until I saw what you meant in the picture! Young tortoises sometimes move their front legs in and out and their head bobs slightly with each breath. It's nothing to worry about. But a tortoise who keeps his eyes closed quite a bit of the time MIGHT be something to worry about, so keep your eye on him and let us know how he's doing.
Make sure you soak him in shallow warm water. He is probably OK,but keep us posted.
It is true that the pellets can be drying, and not as easy to burrow into. Consider getting some organic topsoil instead, perhaps mixing with some coir (coco fiber bedding). That way the under layers are more moist, and it is also healthier for them as far as walking around and developing strong muscles (better than pellets).
In the pic you posted the first thing that popped in my head is the eyes seem a bit puffy along with the skin around the neck could stand to be a bit juicier....do you offer warm water soaks for this tort ? How long have you had the tort in your care? Where did you acquire the tort from?
Also, a nice deep earth type substrate would likely offer up a better place for the tort to dig into....