May Gibbs saw it once herself, early last century, and was inspired to create the "ugly little, wicked little men" that became the villains of her beloved Snugglepot and Cuddlepie stories. Her Banksia Men would lurk around trying to capture the sweet, bare-bottomed gumnut babies, and the rather beautiful flower cones from which they originated have become forever associated with these storybook nasties.

But sculptor Heather B. Swann had no thoughts at all about the sweet-sour children's classic when she received three banksia cones in the mail, wrapped in brown paper. There was no note attached, but she knew they were from the same friend who had taken her to an exhibition of botanical art at the Ballarat Art Gallery.

"I sat down to draw these three banksia cobs, and as often is the way when my drawings don't work, I used a lot of black ink and I made a lot of mess and I did a big black ink blob over the top of these three banksias just laid out in a row," she says.

"I left them peeking through, and I held it up and I thought, oh my goodness, it's a banksia man!"

Although she had never read Snugglepot and Cuddlepie, her next thought was, of course, that she wasn't the only person in history to have anthropomorphised the native shrub.

The Canberra-based sculptor has since taken the metaphor to extreme lengths – no delicate drawings or woodland sprites for her.

"Rather than me making the banksia men as a direct reference to May Gibbs' story, I am actually extending the metaphor, I'm actually broadening the canon that encompasses the various references and the various representations of the banksia men in our culture."

Her large-scale installation Banksia Men now forms part of a haunting and immersive display at the National Gallery of Australia. There are nine of them, larger than life and looming, standing amongst a series of sculptures that include disconnected legs casting shadows on the wall, and disembodied heads gazing, besotted, at each other at either ends of a seesaw.

The works will form part of Nervous, a display, theatre and musical performance, as both objects and costumes; the Banksia Men will walk slowly around while singing, the legs will be slung across the shoulders of a six-foot-high man, and singers will perform a work composed especially for the installation.

But none of this should be cause for trepidation. Swann's work is, in her own words, "dream-like, uncanny and surreal" but there is whimsy and levity even beneath the dark, moving shapes of the Banksia Men.

The nine "men" took a year to make, using hundreds of metres of plain black silk, gathered and pulled with thousands of knots and stitches, and complete with glass eyes and eyelids. Before that, she had spent another year making the other works in the show, one of which included a single Banksia Man head. Back then, she and her husband lived in Melbourne, and she was in the planning stages for what would become Nervous. She commissioned composer Thomas Green and poet Kevin Brophy for words and music, and had already found her leading lady – Astrid Connelly, a beautiful, vision-impaired albino woman she once spotted in a Carlton bookstore, and was so moved by her appearance that she asked her to feature in one of her works. Serendipitously, Connelly was also a young music student with a beautiful soprano voice, and will be singing in Nervous, resplendent in a dress adorned with glass eyes.

She wasn't sure, at that stage, how many Banksia Men she would make, but her poet made the decision for her, in a roundabout way.

"He'd seen the head and he knew that it was going to be a full figure, and he wrote the poem and it said, 'We come in threes', and I thought, I'll have to make three," she says.

"But three is a bit religious, and six is not my favourite number, it's a bit even - it'll have to be nine."

All he knew her were aghast. But by then, her husband, David Hansen, had accepted a lecturing position at the ANU College of Arts and Social Sciences, and the couple had moved to Canberra.

"I didn't really know many people, I didn't have a studio, and this was the perfect project," she says.

"I turned our front room into a studio which had bits of black cloth, and then gradually as they came to life our little tiny rented house was filled with these nine men."

The NGA's senior curator of Australian art Deborah Hart was keeping a close eye on the project by this stage, knowing that the works would soon be on display in the gallery. She had become aware of the project at a time when the gallery was interested in ideas around visual art and performance.

"We were wanting to look at different approaches to sculpture, and so it just seemed to tie into a few strands of thinking that were happening at the time," she said.

"As they developed, it was pretty incredible going to Heather's studio and seeing her working on them…She was still in the early stages at the end of 2014 - and she'd done one banksia man which had a really incredible presence, and I was very struck by the way that she was making these, the extraordinary attention to detail. I think each banksia man has 50 eyes on them, and that means 100 eyelids."

In the meantime, the nine men have featured in the Adelaide Biennal of Australian Art and have been acquired from the Art Gallery of South Australia.

Taken together, Nervous is much more than the nine looming Banksia Men, dominant though they are. Swann has been ruminating on the concept for years, and, as with many of her works, it has begun with reams of drawings. But while these drawings often become works on display themselves, this show – the exhibition component – is all about the three-dimensional works.

"I wanted it to be an installation of these sculptures and for it to be just a magic playground, really, or a mysterious world where people could wander," she says.

"I didn't want it to be like a museum show… I really wanted it to be an immersive, magical, dark, mysterious 'where are we' sort of experience. If I put drawings on the wall, that would have just broken that. It's a strong sculpture show."

And all the works are made to worn or interacted with – tools for performance as much as objects on display. A lumpy bed with a figure obscured by a blanket covered in glass eyes is an extension of an older project in which she responded to the theme of schizophrenia, while an oversized donkey basket lined with cosy-looking black silk are "two padded, soft, silky voids that you can get in and lie in… a place to put your deep feelings in. I like hidden inside spaces, and there's a lot of hiding, I suppose, with blankets and covering up."

These baskets could just as easily be large gumnuts, just as the two heads on the seesaw could be, in another reading, a pair of lost souls who have finally connected and stare, besotted with each other on a seesaw while the rest of the world falls away. Swann revels in the idea of viewers reading multiple meanings into her work.

"I love the fact that people tune into it with Snugglepot and Cuddlepie, but I also love the fact that it's much bigger and broader than that," she says.

"It's quite sweet, and I do wonder, what was May Gibbs thinking? She's got these big black banksia men stealing little white babies in the time when there were all these other dark things happening in history. Maybe she was trying to be subversive. It's the richest, richest, richest work, and it took me a year to make those banksia men, so I had plenty of time to think all of those thoughts."

"And nothing in here's literal; I try and build as many meanings and layers and strangenesses into the sculptures so that they're all enigmatic and they're all open. Yes, you can go straight to the May Gibbs Banksia Men or yes you could go straight to another really direct reading of my works, but if you keep thinking, and keep looking, you'll find something else."

Nervous, by Heather B Swann, is showing at the National Gallery of Australia until November 20.

The Nervous performance is on Saturday September 3 at 7.30pm and Sunday September 4 at 2.00pm in Gandel Hall at the National Gallery of Australia. For bookings and information, visit nga.gov.au.