Pascal's mugging only is killed if the expected utility of handing over the cash is negative.

This will be the case in the scenario under discussion, due to the low probability of the mugger's threat (in the "3^^^^3 disutilons" version), or the (relatively!) low disutility (in the "3^^^^3 persons" version, under Michael Vassar's proposal).

So the paperclip maximizer can still have a constantly-increasing utility as they make more paperclips, your rule would just bound it to growing like log(N)

Yes; it would be a "less pure" paperclip maximizer, but still an unfriendly AI.

The rule is (proposed to be) necessary for friendliness, not sufficient by any means.