I would suggest doing one of two things with the food. First what always seems to work best for me is watch what time of day your bird is usually eating them most. Then right before that time take the seeds out of the cage and put in its place only healthy food (pellets, veggies and grain etc) offering a variety if possible. Leave these in for a couple hours until his main foraging time is over and then later in the day replace with the seeds. Since they do pick at their foods throughout the day this will assure he doesn't starve himself but if they are used to their largest intake of food during one to two times a day and only healthy things are available then they will most generally start eating them.
The other option is as you mentioned basically reducing the amount of seeds in the bowl and increasing the amount of pellets every few days until only pellets are remaining. Still I would suggest offering other foods as well just not the seeds or as many seeds. Some seeds mixed in with their other food (as long as they eat the other food) isn't harmful, it is only when the main part of their diet is seeds that it is unhealthy.
As far as toys. Most of the wicker balls sold in craft stores have been lacquered or treated. If they look shiny then definitely don't use them. Sometimes you can find untreated vine balls at Dollar Tree (if you have one in your area) just be careful not to get the scented or painted ones. You can color them yourself in food coloring to make them more interesting or stuff shredded paper etc in them. Some other cheap but nice ideas are popsicle stick toys which you can make in many different varieties. Also since most lovies like to swing you can improve upon the old wood with wire sides or plastic swings by adding beads, short pieces of leather, knotted 100% cotton rope and small wood pieces along the sides. Look around in the craft department at walmart for thinner wood shapes or at dollar tree etc, they will usually have some things you can use in your toys. Shaped pony beads of all sizes work well. You can also use childrens puzzle pieces, the cardboard type and string them on a rope, leather or SS wire. I will try to post some pics of our toys tomorrow to show you some more ideas. We sell them at bird fairs to make money for the rescue, we also use them for our birds and make sure that anyone adopting a bird takes home at least 1-2 new toys and they always seem to go over quite well!
I am including a picture of one of the simple Christmas trees we made with popsicle sticks and pony beads just to give you an idea of how imaginative you can be with something as simple as popsicle sticks.
