Just trying out DOS2 after a long hiatus, nice improvements so far.
The first thing that comes to mind with poly is that it would be awesome to turn an item into a chicken that runs around randomly then turns back into an item. Because the chicken runs randomly it severely limits any blatant abuse (tele is much more simple).

*turns co-op partners much needed potion into a chicken, chicken runs into a group of enemies, checkmate*

*co-op partner is into role play, serious role play partner's seat is suddenly a chicken*

*co-op partner is holding a weapon -> stealth pickpocket and poly chicken -> co-op partner is now holding a chicken -> co-op partner is no longer holding a chicken, weapon has run off*

*co-op partner is cooking, fire place turns into a chicken and runs off*

If you like having a bit of fun with your co-op partner (like me), this just seems like a fairly simple tweak to an existing spell that would be quite fun. Characters that are jesters/tricksters would be immensely pleased.

There may be the argument that turning an inorganic item into an organic animal goes against 'polymorph rules'. Mechanical chicken might fix that if its a problem for players? I don't think its a huge problem, it is magic after all. I think the comic effect of an organic looking chicken far outweighs the more realistic effect a mechanical chicken would bring.

Anyone have thoughts as to whether this would be fun or not? Any situations where this may break the game?

It could be a problem in online multiplayer with random people. Turn an AFKS items all into chickens and steal the items once they turn back into said items. You would have to make sure that player items could only be picked up by the owning player after being turned into a chicken.

I do think it would be a small addition that would add a lot of fun. If anyone can see problems, comment away!

NOTE: I'm assuming that if the chicken dies, the item just appears where the chicken used to be. Otherwise you could lose items permanently, which would not be fun.