It's hard for us to comprehend sometimes why woodpeckers do what they do. Sometimes it's bugs, sometimes they are looking for a place to roost/nest, sometimes it's drumming. Looks like this one was serious about enlarging the hole, so making it into a woodpecker house might have been on his mind. Were that the case I'd invite him to stay and make a different chickadee house.

As part of my evolving bluebird house design to defeat the various critters who want to expand the hole I've started reinforcing them. McMaster Carr sells nice stainless steel flat washers in every conceivable size. I take one with the right size hole for the bird house, drill a couple of screw holes through the edges and place it over the opening in the wood. Even the most determined squirrel or woodpecker doesn't have much success against 1/8-3/16" of stainless! Stainless are a little more expensive than plain steel, but they don't rust. When the houses pass their lifetime I recover the washer and re-use it on the next generation.

I have several boxes up. I'm letting the woodpeckers do their thing with the bluebird boxes but I wanted to save this Chickadee specific box. It's amazing how much of our natural world remains a mystery and perhaps always will. I put a chickadee guard on it. Thank you for your reply!