The 15-year-old, who cannot be named, was already in custody when he was charged on Friday with conspiring to engage in an act in preparation for, or planning, a terrorist act.
He had earlier been arrested after allegedly throwing a wooden plank towards a worker at a bottle shop, Parramatta Children's Court was told on Wednesday.
The boy's lawyer Ahmed Dib tendered a bundle of documents including an affidavit from the boy's mother, school report cards, and a psychological report.
The material showed the boy had a history of behavioural issues, lacked confidence and had low self-esteem, Mr Dib said as he argued exceptional circumstances should secure the teen's release.
Bishop Mar Mari Emmanuel was stabbed during a live-streamed sermon. (HANDOUT/Christ of Good Shepherd Church)
But prosecutor Rebekah Rodger said that was to be expected.
"A young person with behavioural issues facing a terrorism accusation is not exceptional, it is rather the norm," she said.
The boy had been involved in an encrypted chat group titled "Plans" where he talked about targeting Jewish people, Ms Rodger said.
The boys were not just talking and knew people who had acted on threats, she said.
"I know the bloke who done it, he's my mate," the boy wrote in relation to the April 15 stabbing attack on Bishop Mar Mari Emmanuel at Wakeley in western Sydney, Ms Rodger told the court.
Mr Dib told the court the boy put on a macho performance in messages about performing an attack and was not the monster prosecutors sought to paint him as.
The boy had been in possession of a kitchen knife when he threw a wooden plank at a bottle shop employee, but did not pull out the knife, before the group left, he said.
"He could have acted as a monster, he did not," Mr Dib said.
"He does not pull that knife out at any point, on footage captured by CCTV.
"Instead he throws a plank that is alleged to have narrowly missed this person and then left the scene," Mr Dib said.
Two hand-drawn ISIS flags were found in the boy's bedroom when police raided the family's home in April.
A knife and a tomahawk were found in the garage, which Mr Dib said were for chopping branches.
"There's no direct point, it's one of those curved knives for that purpose," he said.
Magistrate James Viney was unimpressed by an unclear statement of alleged facts, signed only by the Joint Counter-Terrorism Team as a collective.
The lack of an author who could clarify things to the court was not satisfactory, particularly when dealing with a 15-year-old in custody, he said.
"If a set of facts is going to be presented in such a serious matter, there should be someone as the author," he said.
An affidavit explaining how electronic monitoring for the boy would work if he is released came late on Wednesday.
Ms Rodger sought an adjournment to respond to the new evidence.
A senior AFP officer may also give evidence to resolve an issue relating to the location of the boy's passport when the matter returns to court on Thursday morning.
The 15-year-old leaned on his fist for much of the hearing as he watched on from custody via videolink, as his parents sat in court.
