Yes.

Yes.

I didn't intend to solve Pascal's Mugging. Extremely high pay-off with slightly less extremely odds still doesn't feel right. But I have the beginning of a solution: the way the story is told (gimme $5 or I torture 3^^^^^3 people for 9^^^^^^^^9 eons), it doesn't ask you to bet utility on unfathomable odds, but resources. As we have limited resources, the drop in utility is probably sharper than we might think as we give resources up. For instance, would you bet $1000 for $1M at 1/2 odds if it were your last? If having no money causes you to starve, suddenly we're not talking 500 fold return on investment (on average), but betting your very life at 1/2 odds for $1M. And your life is worth 5.2 more than that¹ :-). It doesn't solve everything (replacing "gimme $5" by "kill your light cone" still is a problem), but I'd say its a start: if there is a Lord Outside the Matrix, it means you have a chance to get out of the box and take over, with possibly an even greater pay-off than the original threat. But for that, you probably need your resources.

[1] can't find the study, and I hesitate between 5.2 and 5.8. On average, of course.