>can purely psychological events (i.e. what you observe and contemplate) cause permanent alterations to that chemical balance, cellular dysfunction, structural damage in the brain, etc?

I think so. Amblyopia is an example of structural changes in the brain based on what you observe. It generally happens early in life when the brain is more plastic but it proves it is possible. There is also evidence that amblyopia may be able to be treated in adulthood.