I really do not think that the damp towel is the best idea in this case.
When a bird is fluffed it mean it is trying to insulate itself and keep the heat and warmth in. The humidifier if you have one would be a good idea though.
Remember when they start getting fluffed and not eating, lose their balance, look and act sleepy all the time, are not interested in playing, you need a VET involved it does not take long without treatment from this stage for a bird to succumb to whatever the illness this is, with treatment from a VET your bird has a chance of pulling out of the infection. Any and all of the above signs indicate YOUR bird is SICK. Any of these are a sign the bird is ill.
What you might want to do about the VET is talk to the Avian VET that is so far away and to the VET that is local see if they will do a phone consult with each other to go over results and tests. I can tell you what tests you need to have the VET run. You need a CBC, a gram stain, a fecal, a culture, and for good measure I would throw in a metal panel. The test results are actully very easy to read as they give what the high and low normal is on the sheet that comes back and what the # is to each test that came up with each item for you bird. As for the meds they need to give you this may be where the phone consult is needed with the Avian vet.
Some sites on ill birds things to look for
http://home.ca.inter.net/~dhansen/dropping.html
http://www.geocities.com/operaghost88/sick.html#gia
Have you checked the droppings of the bird??
Are they loose, runny, watery looking??
If so then your bird has an infection and needs to see a VET.
Keep in mind that when a bird starts to get like this then they have been sick for sometime. NO matter how WARM it may be in the area you have the bird in, this may not be how the bird got ill.
Bacterica in the water, something unclean about the cage, eating some food that was spoiled even seed that has been around to long are all ways that a bird can become ill. A slight draft can cause this also.
Think like this when you are ill you want to sleep, stay warm, and usually do not want to eat.
What you can do for the moment til you get to the VET
Take the cage you have your bird in put a towel around it with a area to get fresh air. Then take a towel wrap it around a heating pad on high place it under the cage. Lower all the perches so the bird is near the heat, the fluffing up is trying to give itself heat and keep its self-warm. Make sure the bird has access to food and water; move them down to the birds level if they are usually up high.
Stay away from meds that go in the water as 9 out of 10 times it will detour them from drinking the water they need cause the taste is awful. Things added to the water can be a bit on the bitter side and a big turn off for the birds to drink.
If it must go in the water you can try to mask it with a bit of Orange Tang this will help your gamble some that the bird will drink a bit more then before but it is a 50/50 chance unless your bird was brought up drinking things other then water.
I would measure the amount of comsuption of the water your bird may drink since if this is added in, barring of course any bathing they may do out of the water dish.
Not only this what if you are giving the bird the completely wrong meds for this then you could be harming instead of helping.
Be careful also cause some drugs will cause bad side effects.
DO NOT allow the VET to give your bird BAYTRIL/CIPRO as this can either give your bird bad side effects (like respiratory system problems) or kill your bird ask for OTHER ALTERNATIVES. A vet that offers BAYTRIL/CIPRO to me is not a VET worth going to. DO NOT be afraid to ask what the VET is doing and why!!
Although this drug is a wide spectrum antibiotic it is also one of the that I know that has killed and brought on many bad side effects that birds will live with the rest of their lives after using this drug.
Hope some of this can be of some help to you.