Well, for what it's worth, as my hair is quite a bit longer than yours (to my waist), some nights I braid my hair, and some nights I put it up in a bun on the back of my head. In either case, I cover my hair, braided or bunned, with a satin sleep cap that I get from Sally's Beauty Supply. I've been covering my hair every night with a satin sleep cap, oh, for a good 15 to 18 years or more. If covering my hair while I sleep is causing any kind of damage, well, I haven't noticed it. Also, I tuck the satin cap behind my ears. I have no particular issue with my ears being covered while I sleep (not so I've noticed anyway), it just seems the natural thing to do to tuck the cap behind my ears.
As an alternative to the sleep cap, you can also get from Sally's Beauty Supply a satin pillow case that is designed specifically to minimize friction on your hair while you sleep. Apparently the slippery satin prevents damage to your hair and lessens the effect of "bed head". My sister is a fan of the satin pillow case. I'm a satin sleep cap girl all the way.
I hope this helps.

Miharu