The$\DeclareMathOperator{\GL}{GL} \DeclareMathOperator{\SL}{SL}$ The maximum of the function counting square roots is attained at $x_0=1$ and this statement generalises quite well.
Let $s(\chi)$ denote the Frobenius-Schur indicator of the irreducible character $\chi$. ThusFor the definition, see the edit below. One has $s(\chi)=1$ if the representation of $\chi$ can be realised over $\mathbb{R}$, $s(\chi)=-1$ if $\chi$ is real-valued but the corresponding representation is not realisable over $\mathbb{R}$, and $s(\chi)=0$ if $\chi$ is not real-valued. Then, the number of square roots of an element $g$ in any group is equal to $$\sum_\chi s(\chi)\chi(g),$$ where the sum runs over all irreducible characters of the group. See below for a reference and a quick proof of this identity.
Of course, inIt follows from the usual theory of representations of $S_n$, that in this special case all Frobenius-Schur indicators are 1$1$, so the number of square roots of $x_0$ is just $\sum_\chi \chi(x_0)$. This proves that the maximal number of solutions is indeed attained by $x_0 = 1$, since each character value attains its maximum there. This generalises immediately to any group,all groups for which anyevery representation is either realisable over $\mathbb{R}$ or has non-real character, e.gin other words has no symplectic (or sometimes called quaternionic) representations. That includes all abelian groups, all alternating groups, all dihedral groups, $\GL_n(\mathbb{F}_q)$ for all $n\in \mathbb{Z}_{\geq 1}$ and all prime powers $q$ (see [1, Ch. Other cases would requireIII, 12.6]), and many more thought.
[1] A. Zelevinsky, but this is likely the right way to go about itRepresentations of Finite Classical Groups, Lecture Notes in Mathematics, Vol. 869, Springer-Verlag, New York/Berlin, 1981.
Claim: If $n(g)$ is the number of square roots of an element $g$ of a finite group $G$, then we have $$n(g) = \sum_\chi s(\chi)\chi(g),$$ where the sum runs over all characters of $G$, and $s(\chi)$ denotes the Frobenius-Schur indicator of $\chi$ is, defined as $s(\chi)=\frac{1}{|G|}\sum_{h\in G}\chi(h^2)$.
Proof: It is clear that $n(g)$ is a class function, so it is a linear combination of the irreducible characters of $G$. So let's just takeThe coefficient of $\chi$ in this linear combination can be recovered as the inner products with all characters of $G$ to find their coefficients, noting that we$n$ with $\chi$. We can write $n(g) = \sum_h \delta_{g,h^2}$ (here $\delta$ is the usual Kronecker delta):, so we obtain $$ \begin{align*} \left< n,\chi \right> &= \frac{1}{|G|}\sum_{g\in G}n(g)\chi(g) = \frac{1}{|G|}\sum_{g\in G}\sum_{h\in G}\delta_{g,h^2}\chi(g)=\\\\ &=\frac{1}{|G|}\sum_{h\in G}\sum_{g\in G}\delta_{g,h^2}\chi(g) = \frac{1}{|G|}\sum_{h\in G}\chi(h^2) \end{align*}$$$$ \begin{align*} \left< n,\chi \right> &= \frac{1}{|G|}\sum_{g\in G}n(g)\chi(g) = \frac{1}{|G|}\sum_{g\in G}\sum_{h\in G}\delta_{g,h^2}\chi(g)=\\\\ &=\frac{1}{|G|}\sum_{h\in G}\sum_{g\in G}\delta_{g,h^2}\chi(g) = \frac{1}{|G|}\sum_{h\in G}\chi(h^2), \end{align*}$$ as requiredclaimed.
Edit 2: I got curious and ran a little experiment. The proof above applies to all finite groups that have no symplectic representations. So the natural question is: what happens for those that do? Among the groups of size $\leq 150$, there are 1911 groups that have a symplectic representation, and for 1675 of them, the square root counting function does not attain its maximum at the identity! There are several curious questions that imposesuggest themselves: is there a similar (representation-theoretic?) 2-line criterion that singles out those 300-odd groups that satisfy the conclusion but not the assumptions of the above proof? What happens for the others? Can we find an if and only ifa complete characterisation that provides more insight into the structure of the groups, whose square root counting functions is maximised by the identity? Following Pete's suggestion, I have started two follow-up questions on this business: one on square roots and one on $n$-th roots.