Towns flatten terrain, except for mountains. Terrain is generated first, so the more mountains, the less success towns have in generating and you would get less. I reduced mountain max scale a bit and may reduce the default mountain percent. I recently removed mountains from wasteland to allow bigger cities there, but their success rate is not as good as I hoped, so needs more work to figure out why.
I don't think anything is adding them after. Cities/towns use up the space pretty well now.
Maybe. Artists add those, not me.