In this video: http://www.youtube.com/watch?v=uvhqXL2A5x0

When he is doing the percussion in between the finger picking, is he using his nails?

Every time I try to do this, it doesn't quite sound like that, or like any of the other videos on youtube.

He doesn't seem like he is even hitting the strings that hard either.

Any help with this?
The sound he is making comes from stopping the strings. Although he isn't hitting the strings very hard he is hitting them harder than is normally necessary to stop strings. Try playing some open chords and use your palm to stop the strings and you should get the same sound.