I don't see why it "was a mistake" to confide in him. Had you not, would that have made him a better boufriend? That's what courtship, or dating, is for: to reveal yourselves gradually and see how that works out.

It takes time to discover what a person is like. There is no quick vetting process, whereby we can know quickly if someone is right for us. Some alertness to "red flags" may help us to quickly reject the totally unsuitable. But you needed time to learn how enmeshed his life is with his mother's." Like, in my case, I avoid men with anger issues. (Probably because I grew up with an angry father.) Red flags for that tend to come up pretty quickly, but not always.

You seem to be chastizing yourself for dating a guy you found unsuitable. But isn't that the whole point of dating? It's not like you married the guy without knowing him. You got to know him and how he relates with his mother, and you decided "No thanks." That's how it works.

Living in the finished basement works for him, in his opinion. That may give him stability. However, an arrangement that stabilizes him would likely destabilize you. Your responsibility is to not continue in a relationship that you find unhealthy for you.

Lastly, the other employees at work can presume what they like. You don't have to justify yourself to them. Of course, they'll gossip. Generally, it's good to keep your personal business to yourself at work. In your case, that probably was impossible since he and you work for the same employer. So you just do the best you can. Strictly avoid talking him down to any of your co-workers.