In my experience, yes - limit any pre-built settlements and cap them at level 1. You can always manually allow a settlement to upgrade to level 2, but on my basic XBone many times I get crashes and freezes when I do. I have stopped allowing any more than 5 to pre-build and do the rest myself, &/or only allow the level 0 set up and then carefully monitor before letting them upgrade. YMMV.
This seems like solid advice and matches with my own experience.
Forgive me for wandering off on a tangent about SS/Xbox play in general.
TL/DR: A happy Xbox SS play requires smaller, more specialized settlements. Playing on an Xbox is like adding a(nother) layer of restrictions to SS.
In my humble opinion, based on my even more humble experience, playing SS on the Xbox is like a game within a game within a game.
The Xbox itself is like having some sort of limiting mod installed. PC players (in general) tend to want to push SS and settlement building to the limits: bigger better and more and more lush. This isn't a bad thing at all, quite the opposite in fact. But playing on the Xbox because of the Xbox has taught me to appreciate a certain austere sparseness. (How can I do more with less?)
Things that have worked for me to combat the restrictions that the Xbox itself adds to any SS play:
Every settlement can't have everything. And some settlements won't have much. It's the network of settlements that matters most.
Plot count is at a premium so I add and build Residential plots only at the late stages of a settlement's development. Residential plots are a reward for hard work. Not all my scavvers will receive this gift. Once a network of settlements is up and running I'll consider making a town of mostly just residentials. (Those who come after reap the rewards of the pioneers' sweat.)
I've recently taken to turning off the commercial requirement. I used to follow the population rule. But now I like to get shops to level 3 fast so that I know everything is cool and then build around them so I don't ever blow past the build budget. Previously, by following the population restrictions, I found that I was only adding them last and their upgrades were often butting up against and even past the build limit.
Once a few settlements are well developed and supply lines are established, I turn off the martial tech requirement. This simulates the idea that settlements can share technical knowledge. Needing 4 industrials at Jamaica Plains just to get a level 3 martial plot is too much for my Xbox.
I've yet to find a settlement that can support 20 plots without causing problems. 14 or 15 plots start to make me nervous. RotC is a no go for me. I think it's awesome, but I won't use it on the box. It's either a ticking time bomb or I have to limit myself to only an early stage which frustrates me. RotC offers the promise of settlers building their own, but on the Xbox it turns into settlers kind of sort of building a little on the own (if you limit upgrades) or it blows up if you just let them go full bore (level 3 cities)
Also, by mid to late game, I've noticed that with any number of well planned well built settlements, my network of settlements can be stockpiling just too much crap/junk.
Maybe I'm only imagining it but an overloaded workbench seems to cause problems just like an overbuilt settlement. (Is 20,000 Mutfruits too many?) On one my last games, things seemed to stabilize quite a bit when I had IDEK's move everything to the Mechanist's Lair, but even though the Lair only had a few plots things there would get spotty. (I finally made myself stop pack ratting ever weapon and armor I came across.)
