So, the category $\text{Set}$ has internal homsets. The set of total functions with domain $A$ and codomain $B$ is indeed a set.
I think this means the collection of arrows $\hom_{C}(A,B)$ is always "isomorphic" or "equivalent" to some object in $C$ , written $[A,B]$ .
Are the homsets literally objects in $C$ ? For instance, is it possible to construct an infinite descending chain or other pathological object if the homsets are themselves objects instead of corresponding in some natural way to objects in the category? Assuming they aren't objects in the category, what is the relationship between a homset and the object it corresponds to in a category with internal homsets?
The Internal Hom-Sets, $[X,Y]$ as you denote them, are specified by $$ X × Y → Z \quad≅\quad X → [Y, Z] $$
Now a “point of $X$” is defined to be an arrow from the terminal object, , so we have the following relationship. $\def\stepWith#1#2{ \\ #1 & \quad \color{green}{\{\;\text{#2}\;\}} \\ & }\def\step#1{ \stepWith{\equiv}{#1} }\newenvironment{calc}{\begin{align*} & }{\end{align*}}$
\begin{calc} \mathsf{points}\, [A, B] \stepWith{≅}{ Definition of points } → [A, B] \stepWith{≅}{ Characterisation of internal-hom } × A → B \stepWith{≅}{ Terminal object is identity of × } A → B \end{calc}
Hence the internal hom and external hom are ‘equivalent’ in that: $$ \mathsf{points}\, [A,B] \;≅\; (A → B) $$
As you have observed, in the category Set we have $\mathsf{points}\, X \;≅\; X$ and so the internal & external homs are directly isomorphic.
Nice question :-)