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Hi, Mary Anne, Yes, it is possible that the worm was attacked by the tiny wasps before it went into the cage. The "eggs" are actually cocoons; the eggs were laid under the "skin" of the hornworm and these are the result. As for how it's done...a special type of braconid wasp inserts its eggs into the caterpillar (hornworm). The eggs hatch into wasp larvae that feed on tissue in the caterpillar. This eventually changes the color of the hornworm but—fear not—it is still alive. The wasp larvae eventually chew through the hornworm's skin to pupate...and each white "egg" attached to the caterpillar/hornworm is the cocoon of another special braconid wasp. Before long, the new wasps will break free and be ready to mate and attack next year's hornworms.
There is a lesson—or one heck of a bedtime story—here for you and your nephew. Good for you for going after the detail! And thanks for asking us. (We learned something too.)
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This sounds more like an armyworm. Besides handpicking, you could try applying the natural bacterium Bacillus thuringiensis (Bt) for control. Talk to your local garden store.