Summary: the problem with Pascal's Mugging arguments is that, intuitively, some probabilities are just too small to care about. There might be a principled reason for ignoring some probabilities, namely that they violate an implicit assumption behind expected utility theory. This suggests a possible approach for formally defining a "probability small enough to ignore", though there's still a bit of arbitrariness in it.
This has nothing to do with bounded utility. Bounded utility means you don't care about any utilities above a certain large amount. Like if you care about saving lives, and you save 1,000 lives, after that you just stop caring. No amount of lives after that matters at all.
This solution allows for unbounded utility. Because you can always care about saving more lives. You just won't take bets that could save huge numbers of lives, but have very very small probabilities.
This isn't what I meant by bounded utility. I explained that in another comment. It refers to utility as a real number and simply sets a limit on that number. It does not mean that at any point "you just stop caring."