Kerry, as it happens, is NOT an example of a place name that became a person's name. Many of the others given here are in fact nicknames or stage names, so they would not be passed on to children and don't really count. So the extent to which this process really happens hasn't been proved.

Here's one part of the answer: when foreign names enter English, they get changed to a familiar word that sounds similar; hence Irving Berlin. So that's one way this might happen, and in this process the place name must be very familiar. An obscure county like Leix would be less likely to supply a name than Kerry, Dublin, Cork or Galway. A whole country, like Ireland, can become a name, as can a big city. I know a Judy London--I'm pretty sure she's Jewish so it probably was not her family's original name. Probably taken because Lodovnik or Lodznik (or whatever) was too hard for the Ellis Island folks. London would have been used purely because it was familiar. A county like Offaly or Donegal might not be used because there might not be names in other languages that resemble them, or because they might have negative connotations (Offaly sounds a lot like both Offal and Awful).

In the middle ages people were called things like "Richard at the Lee," etc, so we get geographic names like underhill, etc. These would have to be locally distinctive; surnames began as a way of distinguishing one Jehan from another. Place of abode, occupation, parent's names, or physical features could be used. So Wat Underhill would be distnguishable from Wat Brewer, Wat Jamieson, and Wat Long. In these cases, it would be purely local place names rather than counties or cities.

So those are two ways it might happen. In neither case would it be likely for an obscure town or county to give its name to a person, though a geographical feature and a common or familiar town or county might.

Anyone have other thoughts?