Chewing, hay, food, holding...
My chin, Sunny, lets me hold him for usually only a couple minutes at a time. If an emergency ever popped up, or even just going to the vet, it has to be done for at least a few seconds, so it's important to know how and that they know they'll be safe in your hands. I have him sit on my forearm (all 4 feet) while holding the base of his tail, holding him against my chest. He feels secure there, but bored very quickly, lol. It's normal that they don't like it, but its important. Maybe yours needs a little extra time to bond closer with you, or it just knows you'll stop when it barks, so it barks! They're smart and learn ways to control you pretty quickly, lol! I once read about a chin who would bark really loud at night so their owner would come in the room, lol-it wanted out of it's cage again
I wouldn't moosh his food. The hardness of it is good for their teeth, but also, if it got into his fur....If he's gotten very used to it and won't eat hard pellets as much, try adding a little less water everyday, eventuually getting back to hard.
How does he eat his Timothy Hay everyday? And how much does he chew on his wood and pumice? Check his teeth to make sure he's wearing them down and that they're yellowish-orange. Sunny won't let me check his teeth sometimes-I don't want to struggle with him-so I hold a treat up above him where he has to sit up on his hind legs, and when he's biting for it, I can see his teeth very well.
He may just like the mooshy food, or there could be more to it. If you're sure he just likes it, then try gradually adding less and less water to it. If it could be more, check his teeth and monitor how much loose hay he eats a day by putting in a smaller amount and seeing what he's eaten throughout the day and night (factor in what he wastes, too)-you could even weigh it. Also, check his chew toys to see how much damage he does to them every day.
If it is more than just him liking it, he needs the vet-it could be Malocclusion. It's probably just him liking the mooshy better, though! They very rarely, if ever, get anything mooshy, so maybe he likes the weirdness of it, lol. Get him back on hard and maybe once in awhile as a treat (not in place of the hard), moosh up like 2 tsp of food for him.
I free feed my chin Mazuri-he eats about 1 1/2-2 tablespoons per day without me even having to measure it. When I first brought him home and started slowly weaning him off the breeders food, he went crazy ffor the Mazuri-hers must've been less tasty. Once it was mostly Mazuri and barely any of hers, he started ignoring hers completly. Thank god this didn't effect him-no diarehea or anything. What kind of food do you feed yours? Maybe he'd find another brand more appetizing, like Mazuri Chinchilla Pellets, Oxbow Chinchilla Deluxe, or Tradition Chinchilla Pellets-
http://mistywaterwoman.webs.com/nutrition.htm -my favorite website about chins! Besides this one of course