Okay, I've found a lot of your comments a very useful to better understand the magic surrounding chaotic possesion and I think I've found something helplful for your would inhabitants.
So, one of my concerns was that limiting city growth wouldn't be helpful if there was still a decent danger of a natural object surrounding your now small settlement becomming possesed. While this would still be a concern (and a relevant one for my answer), you've made it clear that most possesions would come for the objects from your settlements' inhabitants.
I think contrary to some assumtions, very small settlements woudn't exist. The reason being, they wouln't really last before the first attack by a Treant, a Mud golem or another mutated creature that required a defense by >20 fighting men or so (or I should actually say both fighting men and women, since in world where a threat is bount to jump out any mundane object I think women would have to know how to defned themselves).
I think while big cities wouldn't exist, at least until there's some way to make chaotic possiesions more manageable, since they'd be bound to too much disruption and large cities require a decent level of organization (food distribution, water, sewage systems, defense form invaders, disease prevention, etc). If you are constantly dealing with chaos, some of this other issues are bound to get out of hand.
On the other hand, smaller cities and towns (think up to about a few tousands or even in the low tens of thousands) would still be prevalent in my opinion. Not only they give reasonable defense from most external natural threats in the vicinity (of course, spontaneus mountains are still outside of what anyone could handle).
In addition, there are certain practices and policies people could take to lessen the risks. For instance, as you mentioned, one bench that seats two is as likely to change as a chair that seats one. So your people will naturally prefer the former over the later, as it will be considered safer. Even better if the benches are fixed to the table so that the whole thing is considered one object, and in turn the table can be fixed to the house. Same with wardroves and similar furniture. As for clothes, I hope you people like onesies cause they´ll be in fashion year round. The merits of underwear would be havily debated against the risk of it becoming possesed by words like "STRANGLING" or "TINY".
Sharing would be havily encouraged in your communities. Why have many more tools than needed if they can be kept in a shared shed among some neighbours and even further lock that shed down when not in use so that it may contain at least the smaller chaoric manifestations. Axes and such tools would probably be disasembled and the sharp bits be kept in metal or some other strong containers if possible. If one turned danegerous just throw the whole thing in to the furnace and melt it to death, recovering the metal later. Creature made of wood would be more manageable with them most damgerous being stone ones, for their sturdiness and potential size. So I guess stone isn't going to be a popular building material unless absolutely needed. Castles and walls can probably stay if they serve a good enough purpose of defending against invaders. Especialy if individual blocks aren't suitable for possesion. Stone houses, stone statues, and other non-essential buildings, probably hardly frowned upon.
Also, pests and animals that don't serve a purpose, they are probably exterminated. No one wants to deal with giant ants or venomous rats. Cat's and dogs can probably stay as they can hunt smaller creatures, and dogs could be trained to spot chaoitic manifestations if they have a characteristic smell or sound, to provide a faster response.
Lose rocks or trash laying around in the city streets, not good looking. Take it away. Your peolpe would probalby invent landfills ahead of thier time. They'd be pretty interesting places I'd wager. With a high density of mutation capable objects over time, there would be a bunch of crazy things over there. They would probably be dangerous places. But maybe also contain some valuables. Maybe an old suit of armor became "INDESTRUCTIBLE" or rusty sword "FIRETHROWING", or a cape "LEVITATING". That's an organic occurring magic item factory if I've ever seen one. You've got a natural dungeoneering system over there. Adventurer may be a preofession in it's own right in your world if you wanted to. If you want something more like a traditional dungeon then maybe have the items burriend in catacomb or maze-like underground structures (so that the creatures have a harder time getting out).
So in summary, with the cooperation of a population I think a settlement could rise to a moderate size with manageable risk, and there would even be certain forces pushing it in that direction. I think you have a really interesting system that caught my attention so I definitely think you have a lot there to explore in depth and come up with something quite unique.