You can change the microstepping, but I would NOT recommend it. The Xylotex is very susceptible to resonance issues, and running at lower microstep settings can make it much worse.
I've been using one for many years at 1/8 microstepping and get very repeatable homing with homemade Hall effect switches.
To be honest, in almost 15 years of doing this, I've never heard anyone recommend reducing microstepping to improve homing accuracy.